Section 8 in MD

[James Barnes]

Gooood morning BP community,

I'm looking to get some info on Section 8/lower income areas particularly in MD, but I believe the same strategy will work in most low income areas. Any MD investors or low income investors, please chime in.

In my search to obtain buy and hold rental properties(3/2's) I have come across many houses that are priced extremely low. These properties are not in the most desirable neighborhoods but are also not considered warzones. These 3/2's meet the 2% rule by far (just found one for 32k($48 a sq ft) that would need about 15k in repairs). ARV is around 130k in this neighborhood to be conservative.

I know most investors say location, location, location but if you have a good property management company in place to deal with "low income problems" wouldn't they be a good deal?

Also, how does one get into section 8 housing? What hoops do you need to jump through to become a section 8 landlord? I don't really see how you can go wrong(if your okay with being a section 8 landlord) if the rumors are true about section 8. A tenant moves in, pays what he/she can pay, the state makes up the rest and after the tenant moves out the state pays for repairs?

Do I have that info right?

I mean don't get me wrong, I'd love to buy in great neighborhoods as well but the 2% rule makes options limited.

Can anyone with experience elaborate?

What are vacancy rates like with section 8 tenants? How do you go about finding tenants?

Thanks for the help in advance BP!

James

[Michele Fischer]

Greetings, James!  I am active in the low income arena.

To do section 8, the property needs to be inspected by the local housing authority.  Assuming a local property manager will want to handle it or do it well may be a stretch; if I were you and didn't plan to self manage, I would start vetting property managers to see if they are having success in your area.  In general low income has more turn over, higher turnover costs, more uncollectable move out costs, and more energy to collect rent monthly (if section 8 doesn't cover 100%), so it isn't a winner for property managers.

You might want to listen to my podcast episode and check out my BP blog; I've reviewed a bunch of books that relate to low income and write about my experiences.