Section 8 gurus - are they worth it?

Question

I have a handful of properties that are local to me (Houston, Tx). All of them have a decent cash on cash return and I’ve always been selective of my purchases. Most of my properties have section 8 tenants and I can’t say I’ve run into any major issues. They tend to stay longer, they pay their portion timely & they don’t trash the house. I think that’s in part due to the rules of the program as well as proper tenant screening.

I’ve seen multiple Section 8 gurus on social media advertising their courses to buy properties in medium sized markets in less expensive states & get insane returns. Usually along the lines of 5-700ish net income per property with the properties costing less than $100k. In my most recent personal experience, the housing authority here didn’t pay the full amount the tenant qualified for based on her affordability worksheet for the zip code/tier the property is in. That number would’ve been around $3000/month. The housing agency did a market assessment and determined they’d pay a little above market rent. I was okay with that since I got the property at a good price and it still makes 3-400/month in cash flow.

That said, has anyone used any of these & do those agencies in smaller markets pay the full FMR as determined by HUD, or would they do a market assessment as well? I am open to trying it, but I don’t want to commit to a property out of state and the hassles that come with that if the net income would only be $300 or so.

Thanks in advance

Kaelyn Motzel · Answer

In my experience (for multifamily), the housing agency takes comps from other non-section 8 residents in the same complex in order to come up with their number. I've never had one come back at full FMR. A few times they have used complexes nearby as well.

Chris Seveney · Answer

@Doug Smith

Great post

In real estate anyone who calls themselves a self proclaimed guru to me is the type of person I would count my fingers after shaking their hand.

Arsen Atanasovski · Answer

If you get one section 8 under your belt your a guru all of them the systems and processes are the same, I would say your already a guru don’t need to do anything extra just to keep on moving along

Travis Biziorek · Answer

Hey Augustine, to me it sounds like you're doing things 100% correct.

These gurus survive by making too good to be true scenarios sound reasonably accomplished.

I have several section 8 properties and it's the same deal... the FMV's are the ceiling for what the PHA will pay. It is NOT the market rate.

Usually, I'm finding I'm able to get close to the FMV but you aren't going to be grossly above market and have the PHA be like, "OK, that seems fair!".

Don't get sucked in by the gurus. You've got the right idea. Keep at it!

Augustine Cherukunnel · Answer

@Arsen Atanasovski

Thanks! Don’t know if I feel like a guru just yet but here’s hoping I can get there one day.

Augustine Cherukunnel · Answer

@Travis B.

Thank you! That was my suspicion. It might still be worth exploring out of state, but I’d have the additional step of independently verifying fair market rents prior to the purchase vs relying on the hud tables.

Thanks for the great info!

Doug Smith · Answer

I had the opportunity to be a guru and partner with a publishing company, but when I saw what they wanted me to do, I said no. I was to go to hotel ballrooms and lead lambs to slaughter. I would take a very, very hard look at their background. It's one thing to have a consultant help you with a really good formal background in the field. It is an entirely different thing to go to a hotel ballroom and listed to someone that was selling used cars this time last year that now is an "expert" in real estate. You get just enough info to wet your whistle so you head to the back of the room to purchase he extra-special coaching for $10K on your AMEX. You also have to really look at the advice your getting on social media and take into account who is giving it. For instance, I can show a heck of a resume with 32 years of formal credit background from 2 of the largest banks in the world and a long track record of successful flips and spec-builds, but I have no background in Section-8. I could probably create an impressive sounding bio, but I know enough to know that I don't know enough about section 8 to give you great advice...but I likely know a lot more than the gurus so. Just be careful and really, really look at their resume as to what makes them a "guru" in the field. I wish you a lot of luck in your quest.

Section 8 gurus - are they worth it?

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