Section 8 a good idea?

Question

Hi everyone! I am currently considering the possibility of investing in properties in strategic locations under $100k and listing them on section. I understand these would probably not be the ideal tenants. However, I like the idea of the guaranteed rental income from the government. I understand there are many requirements for the property and I would be extremely strategic in the property and screening tenants. Does anyone have experience with section 8? Good idea or not? Would love the hear the advice of experienced investors. Thanks in advance!

Travis Biziorek · Answer

Yes, my exact situation is a fringe one, but having vouchers change values is extremely common. That means the "guaranteed" portion is constantly changing.

Travis Biziorek · Answer

S8 can be fine as long as you understand all the pros and cons. But you're already calling it "guaranteed rent" which tells me you don't.

Section 8 rent is NOT guaranteed. It doesn't matter what your favorite guru is telling you.

Vouchers are generally assessed annually and the amounts can, and often change. Just the other month I had one of my S8 tenants go through their annual reassessment. The rent was $1,200 and their portion was ~$550.

After reassessment the tenant's portion went to $1,200... yep, that means they no longer qualified for their voucher and there is no guaranteed portion.

I'd search the forums here for more info about S8. There are many threads like this where lots of folks share insights.

Stuart Udis · Answer

Your comments about acquiring real estate in strategic locations and wanting to rent to voucher recipients for the benefit of guaranteed rent may be at conflict with each other. Usually strategic locations suggest good fundamentals which means you are in a neighborhood where you wouldn't have to rely on section 8 tenants. Alternatively it could mean there are neighborhood fundamentals that were late to be identified or recently created that lead to an emerging neighborhood.

Voucher programs are arduous and not for the faint of heart. There are two categories of investors who generally achieve success relying on the voucher program . The first are the investors who specialize in operating real estate that is leased to voucher recipients where they can benefit from operational efficiencies. They generally have large portfolios allowing for in house maintenance and management staff along with a point person who is communicating with the local housing authority on a regular basis and has the ability to streamline operations. If you don't fall within that category you either get caught up dealing with the BS minutia of the business or are reliant on outside PM's that eat away any margin because there is significantly more time that goes into operating Section 8 rentals and don't let the "guaranteed rent" make you think otherwise.

The others category of investors who succeed are those who identify real estate that can emerge from C/D neighborhood status and use the voucher recipient tenants as the lesser of two evils until the neighborhood can attract better quality tenants. Under the second category you can operate on a smaller scale.

Can you elaborate on what makes these sub $100K homes strategically located? I assume based on the price point these are C/D locations at best but if you can point to reasons why these Sub 100K housing communities will transition to better neighborhood and appreciate then perhaps the voucher program makes sense. If you cannot clearly articulate why these are strategic locations that will reposition themselves and the guaranteed rent is the only way to secure paying tenants then you are operating a business, not investing in real estate.  This means you  will likely fail unless you scale to the point where you fall under the category of those who can benefit from operational efficiencies noted above (and very few reach this stage).

Jonathan Greene · Answer

It is a hard no. I don't even understand how anyone can recommend this as a first investment. What you call guaranteed income is what I call a lot of stress and governmental requirements to get the same or less rent than if you did a good job finding a property and put it up for rent on the open market.

Section 8 rentals are for investors who want to keep replicating that strategy in the same area so they know all the regulations and all the players. It's high upkeep and generally low return and a time suck if you do it as a one-off strategy.

Jordan D'Silva · Answer

Investing in Section 8 can be a solid strategy, especially if you’re looking for steady, government-backed income. The key is to make sure you buy in the right areas and have a solid tenant-screening process and management team in place. Section 8 tenants can be great, but the properties do have to meet specific housing standards, so factor in potential renovation costs to ensure compliance. If managed well, it can be a reliable way to build cash flow—just do your research on the local demand and regulations. I have experience in Section 8 housing, so feel free to connect and ask any questions!

Balakishan Chenna · Answer

Travis,

I agree with you. The scenario you are explaining less than 1%, 99% of the time the rent is guaranteed. i had dealt with hundreds of section8s. Never happend like this.

Thanks

bala

Section 8 a good idea?

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