You found a property that works on paper, but now you're stuck on a decision that changes everything: do you rent to market rate tenants or go Section 8?
This isn't just a tenant screening question. It affects your vacancy rate, your rent amount, your maintenance costs, and how you'll spend your time as a landlord. I've done both across different property types, and the right answer depends on factors most investors don't think about until they've already signed a lease.
How Section 8 Actually Works for Landlords
The Housing Choice Voucher Program (what most people call Section 8) is a federal subsidy where HUD pays a portion of the tenant's rent directly to you. The tenant pays the difference, usually 30% of their income.
Here's what that looks like in practice. Say your local Public Housing Authority (PHA) sets Fair Market Rent at $1,400 for a 3-bedroom. If you rent to a Section 8 tenant, the PHA might pay $1,100 directly to your bank account on the first of every month. The tenant pays the remaining $300.
The government portion arrives on time, every time. The tenant portion? That depends on the tenant, just like market rate.
You can learn more about the program requirements at HUD's official Housing Choice Voucher page.
The Cash Flow Framework
Cash flow isn't just rent minus mortgage. When comparing Section 8 to market rate, you need to account for four differences that show up in your actual returns:
Let me break down how these play out across property types.
Single-Family Rentals: The Clearest Case
Single-family homes are where Section 8 often makes the most sense, especially in B and C class neighborhoods.
The Numbers on a Typical SFR
Take a $185,000 single-family home in a Midwest market. Here's how the comparison might look:
| Factor | Market Rate | Section 8 |
|---|---|---|
| Monthly rent | $1,350 | $1,400 |
| Annual vacancy | 8% (one month) | 3% |
| Turnover cost per year | $1,200 | $400 |
| Annual maintenance | $1,800 | $2,200 |
| Net operating income | $12,756 | $14,048 |
The Section 8 tenant produces $1,292 more per year in this example. Here's why.
Why the Vacancy Difference Matters
Section 8 tenants have a powerful incentive to stay put: their voucher. If they move, they risk losing it during the transfer process. They also need PHA approval for any new unit, which takes 30 to 60 days. For a family that waited years to get a voucher, that's not a risk worth taking over a minor dispute with the landlord.
Market rate tenants have no such friction. They can give 30 days notice and be gone.
I've had Section 8 tenants stay 5 and 7 years in the same property. My average market rate tenancy on comparable homes is 22 months. Every turnover costs you a month of vacancy plus cleaning, repairs, and listing time.
The Maintenance Question
Here's where I have to be honest: Section 8 properties often have higher maintenance costs. Not always, but often enough that you should budget for it.
Part of this is the inspection requirement. Every Section 8 property gets inspected annually by the PHA. They'll flag things a market rate tenant might never complain about: a cracked outlet cover, a slow-draining sink, a missing smoke detector battery. You have 30 days to fix it or lose the rent payment.
This forced maintenance actually protects your asset long-term. But in year one, it can feel like nickel and diming.
The other part is tenant behavior. Lower-income households often have more people living in the home, more wear on carpets and appliances, and less ability to handle minor repairs themselves. This is a generalization with plenty of exceptions, but it's real enough that I budget 15% higher maintenance on Section 8 properties.
Duplexes and Small Multifamily: A Mixed Strategy
With 2 to 4 unit properties, you have options. You don't have to go all Section 8 or all market rate.
The Hybrid Approach
I prefer to keep one unit Section 8 and one unit market rate on duplexes. Here's the logic:
Consider a duplex bought for $245,000 with two 2-bedroom units. Each unit could rent for $950 market rate.
All Market Rate Scenario:
Hybrid Scenario (one Section 8, one market rate):
The hybrid approach produces $1,661 more annually on this example, mostly from reduced vacancy.
When to Go All Section 8 on a Fourplex
If your property is in a C or D class neighborhood, you might find that market rate tenants are just as risky as Section 8 tenants, but without the guaranteed government portion. In these areas, Section 8 voucher holders are often your most stable tenant pool.
The tenants who can afford market rate in a rough neighborhood often have other issues: irregular income, roommate situations that change, or credit problems that kept them out of better areas. Meanwhile, Section 8 tenants have been vetted by the PHA and have a strong motivation to follow the rules.
I know investors who only buy in D class neighborhoods and only rent to Section 8. Their vacancy rates are under 2%.
Large Multifamily: The Institutional Calculation
Once you get above 10 units, the math shifts. Professional property managers price Section 8 differently, and the inspection burden scales.
The Inspection Problem at Scale
With a 20-unit building, annual inspections become a significant management task. Each failed inspection requires scheduling repairs and a re-inspection. If your property manager charges $50 per inspection coordination and you fail 30% of initial inspections, that's $300 in extra management fees before you fix anything.
Some PHAs also require landlords to attend inspections in person. If you're out of state, that's either a property manager charge or an exclusion criterion.
When Large Multifamily Section 8 Works
The play in large multifamily is usually a value-add strategy: buy a building with low occupancy or deferred maintenance, renovate, then stabilize with Section 8 tenants.
Fair Market Rents often exceed what a C class building could get on the open market. If FMR for a 2-bedroom in your area is $1,200, but comparable market units are renting for $1,050, Section 8 is a 14% rent premium.
Here's an example on a 16-unit building:
| Scenario | Market Rate | Section 8 |
|---|---|---|
| Rent per unit | $1,050 | $1,200 |
| Gross annual rent | $201,600 | $230,400 |
| Vacancy (5% vs 3%) | -$10,080 | -$6,912 |
| Management (10%) | -$19,152 | -$22,349 |
| Maintenance (higher for S8) | -$24,000 | -$28,000 |
| Inspection costs | $0 | -$2,400 |
| Turnover costs | -$4,800 | -$1,600 |
| Net Operating Income | $143,568 | $169,139 |
That's $25,571 more NOI annually, which at a 7% cap rate translates to $365,000 more property value. Section 8 can be a legitimate value-add strategy.
The Hidden Costs Nobody Mentions
PHA Communication
Every PHA is different. Some are professional, respond quickly, and deposit rent on the 1st like clockwork. Others are bureaucratic nightmares where getting a rent increase approved takes 6 months and phone calls go unanswered.
Before you commit to Section 8, call your local PHA and ask about their process for:
If you can't get a clear answer, that tells you something.
Rent Increase Limitations
You can raise rent on Section 8 tenants, but it requires PHA approval. They'll compare your requested rent to local FMR and recent comparable rents. If the market has moved 10% and you want a 10% increase, you'll probably get it. But if you're trying to push above FMR, expect pushback.
Market rate tenants get a lease renewal offer. They either accept, negotiate, or leave. The timeline is 30 to 60 days, not 90 to 120.
Eviction Complications
Evicting a Section 8 tenant requires notifying the PHA and following their specific process on top of your state's standard eviction procedure. The PHA doesn't fight evictions for cause (non-payment, lease violations), but they do add steps.
More importantly, if you evict a Section 8 tenant, word gets around. PHAs keep records, and other voucher holders in your area may hear about it. This matters less in large cities, but in smaller markets, reputation effects are real.
Common Mistakes I See Investors Make
Mistake 1: Assuming Section 8 Rent is Below Market
In many markets, especially in the Midwest and South, Fair Market Rent exceeds what you'd get from a market rate tenant in a B or C class property. Always check your local FMR before assuming Section 8 means lower rent.
You can look up FMR at the HUD website for your specific zip code and bedroom count.
Mistake 2: Ignoring Tenant Quality Within Section 8
A Section 8 voucher doesn't make someone a good tenant. It also doesn't make them a bad one. You still need to screen for rental history, income (their portion needs to be 2.5x their responsibility), and landlord references.
I've seen investors skip tenant screening because "the government is paying." This is how you end up with Section 8 horror stories. The voucher guarantees 70% of the rent. The other 30% and all the lease compliance is still on the tenant.
Mistake 3: Not Pricing in Your Time
Section 8 involves more paperwork. You'll fill out forms for the initial lease, annual recertifications, and any rent adjustments. Inspections require coordination. Repairs have deadlines.
If you're self-managing one or two properties, this is an hour or two per month. At scale, it's a property manager line item. Either way, it's real time with a real cost.
Running Your Own Numbers
The right choice depends on your specific market, property class, and management approach. A Section 8 duplex in Indianapolis looks different from one in Phoenix.
Run the actual numbers for your deal. Calculate NOI under both scenarios using realistic vacancy rates for your area (ask local property managers, not national averages). Add 15 to 20% to your maintenance budget for Section 8. Factor in the FMR versus market rate gap.
If you're still in the analysis phase, the single-family calculator lets you model different rent and vacancy assumptions side by side. Run your numbers both ways and see which scenario actually produces better cash flow for your specific property.
Section 8 isn't charity and it isn't a guaranteed win. It's a different tenant pool with different risk and return characteristics. The investors who do well with it are the ones who understand those differences and underwrite accordingly.