I thought the voucher covered the whole rent. It covered 780 of 1,150.

Two years in on the market-rate side and I still managed to walk into this one, so I'll write it up plainly for anyone as new to the program as I was.

I bought a small 3BR in a decent working neighborhood, rent set at 1,150, tenant came in holding a housing choice voucher. In my head the government paid the rent. That's the pitch you hear everywhere, guaranteed income. What actually happens is the authority pays part of it and the tenant pays the rest, and the split depends on the tenant's income. Mine was 780 from the authority and 370 from the tenant.

The 780 showed up on the same day every month for 14 months, exactly as advertised. The 370 showed up for four months. Then it came late, then partly, then not at all.

And because 780 kept arriving, I let it slide. That's the actual mistake. A market tenant who stops paying gets my full attention in week two. This one, I was still collecting 68% of the rent, so I told myself it was manageable and I'd talk to her at renewal. By the time I moved, she was 2,800 behind. Eviction for nonpayment of the tenant portion is a real thing but it runs through my state's normal process, and grounds and timelines vary by state, so check yours. Mine took about four months from filing.

All in: 2,800 of arrears I'll never see, roughly 1,900 in legal and turn costs, and damage past the deposit that my state caps at one month's rent. Call it 5,600.

What I'd do differently: underwrite and screen the tenant portion exactly like it's the whole rent. It's the only part of this that isn't reliable, and I treated it as the part that didn't matter.

6 replies

1jessreyes12AU1APRO8

This is the kind of question I'd have been too embarrassed to ask, so thank you for writing it. Follow-up: does the split change over time? If her income drops does the authority's share go up and yours stays whole?

2stephen_ok9CO2CPRO6

Compass, from what I've read the share gets recalculated at the annual recertification and there's usually a process for reporting an interim income change, so yes, the split can move. Which means the tenant portion isn't a fixed number you can underwrite once. Flint, did hers ever get adjusted, or did she just stop paying without reporting anything?

2aliyah_bAU2APRO6

370 out of 1,150 is 32% and you let it run 10 months. I'm still working out what my first deal costs and this is the line I'm writing down: the small share is the whole risk, so treat it like the whole rent. Feels obvious reading it and clearly isn't in the moment.

2dmitri_v6CapitalPRO6

Flint, one document question. Did your lease spell out the tenant portion as a stated dollar amount with a due date, and did it survive the program addendum intact? I've seen leases where the tenant share is described loosely and the landlord then has a harder time proving what was owed. The arrears number needs to be unarguable on paper before you file anything, and how much of that you can pursue after a move-out depends on your state.

0wendy_park48CapitalPRO7

The part I'd underline is that the 780 arriving on time is what disarmed you. That's the real hazard in this strategy and nobody selling it mentions it. Reliable partial payment makes a bad tenancy feel survivable for months longer than it should. I read the paperwork on a portfolio last year where the owner had four tenancies in exactly that state, all of them nine to fifteen months behind on the tenant share, all of them showing as current-ish on his rent roll because the authority's payments made the totals look fine. He didn't think he had a problem until we pulled the ledgers apart per tenant.

I thought the voucher covered the whole rent. It covered 780 of 1,150.

6 replies