Section 8 Apartment complex

[Cami Bustos]

I just came across a 12 unit apartment complex that is a section 8 government subsidized. I'm not familiar with the investing side of these - any insights, concerns, that I should have?

[Nathan Gesner]

Section 8 is a welfare system. Some people rave about it, some people have terrible experiences. Do some research on Section 8 to get an understanding of how it works, possible pitfalls, etc. Then I would really research the area it's located in. I think most people that have problems with Section 8 tenants tend to be in lower-class communities.

[Patti Robertson]

@Cami Bustos - There are a ton of BP posts about SEC 8.  I'm in the love 'em category.  I've gotten tired of of typing the same thing over and over, so I wrote about my SEC 8 realities in a blog that you can find by clicking on my profile, then looking at the bottom right.

[Tj Hines]

@Cami Bustos, hows the area? Is it in the path of progress? Is it gentrifying? Is it a war zone? Those are some reasonable logical questions to start with

[Cami Bustos]

Originally posted by @Patti Robertson:

@Cami Bustos - There are a ton of BP posts about SEC 8.  I'm in the love 'em category.  I've gotten tired of of typing the same thing over and over, so I wrote about my SEC 8 realities in a blog that you can find by clicking on my profile, then looking at the bottom right.

 Thank you, Patti! I read your blog and that was pretty helpful. 

[Cami Bustos]

Originally posted by @Tj Hines:

@Cami Bustos, hows the area? Is it in the path of progress? Is it gentrifying? Is it a war zone? Those are some reasonable logical questions to start with

Thanks, TJ. Its a quiet little community near a major freeway. Building has been nicely kept and I don't see any issues jumping out at me. It cash flows a decent income after all expenses but the town is not terribly exciting as far as development goes. 

[Account Closed]

@Cami Bustos 

A lot of people on these forums ask about whether section 8 "works" or not, and I think the focus is a bit off on these questions. Section 8 is a program that subsidizes rents for low income tenants. The program itself doesn't exactly have an impact on the asset. I'd recommend evaluating an opportunity by looking more closely at the asset itself and it's market, existing condition, financials, tenants, and overall management status. 

In a market with strong rental demand and favorable landlord tenant laws, I love C+ working class assets. They cash flow well. If a property is well maintained, walkthroughs show tenants taking pretty good care of their units, and the numbers are strong... it doesn't matter to me if the tenants are section 8 or not. 

In a market where demand in working class areas is weak & eviction is tough, I'm much more cautious and probably not interested in investing here at all if cash flow and crash-proofing are my goals. Regardless of condition, tenants, financials, or whether or not section 8 is in use or not. 

Another misconception is that section 8 is only used in D neighborhoods. This isn't the case. I've seen section 8, long term tenants in B areas often. I don't even invest in B areas because cash flow is lower and volatility is higher (I'm trying to avoid equity loss during a crash). C+ neighborhoods are my personal favorite- and if you get burned by a sec 8 tenant in one, the area is good enough for you to still attract plenty of non sec 8 tenants should you choose.