Are Sec 8 rentals a good place for new investor to start?

Question

Is section 8 housing a good place to start investing? Are these properties harder or easier to manage?

Marcia Maynard · Answer

@Bryce M.  You'll find a plethora of discussions in the BP forums about Section 8.  Some investors/landlords are all for it and some dislike working with the Section 8 program.

Basics:

• As an independent landlord, you will be working with the Housing Choice  Voucher part of the program, not the Public Housing part. 
• There's no such thing as a  "Section 8" property. Your property either passes the Section 8 housing inspection and qualifies or it doesn't.  The Section 8 inspections are typically quite basic and focus on habitability issues. All your properties should be habitable and safe, so they should pass inspection easily.
• Section 8 is typically administered by the local Housing Authority. The  way Housing Authorities operate differ like night and day depending on  the location and jurisdiction. Some Housing Authorities are easy to work with and some can be horrible. It all depends on how well they administer the program and how well they work with clients and landlords.
• There's no need to manage your properties differently just because your tenant receives a housing subsidy from Section 8. You establish your rental agreement and you enforce it.
• There is no need to screen your tenants differently or use a different rental agreement than you do for your other tenants.
• You do however need to be willing to accept the Section 8 housing subsidy funds (source of income) and agree to a basic business contract with the Housing Authority. For us it's a breeze because the money is directly deposited into our account, always on time!
• Most tenants with Section 8 Housing Choice Vouchers pay a part of the rent and the Housing Authority pays the other part. If the tenant doesn't fulfill their part of the agreement, they risk losing their Section 8 housing support benefit. So there's great incentive for tenants to abide by the terms of the rental agreement and the agreement they have with the Housing Authority.
• Most Section 8 tenants have a case manager at the Housing Authority who handles the distribution of the Section 8 benefit. Many case managers will assist landlords in talking with the tenant if the tenant doesn't fulfill the terms of the rental agreement.

Dennis M. · Answer

@Bryce M.

Yes it’s fine and there’s really no management difference between a section 8 tenant or any other low income tenant . You will be babysitting adult sized children either way .

Dennis M. · Answer

i have a section 8 tenant . Yes they are entitled yes they are cheating the system ..but its been my experience in low income areas I find most people are all like that anyways . Zero accountability or ambition to succeed in life . They view society as owing them housing food cars phones health care etc just because they can still fog a mirror .they are supposedly destitute yet magically have enough money for lotto tickets , 8$ a pack cigarettes, and alcohol . The Bible says if a man “ won’t work “ he shouldn’t get to eat . I believe that wholeheartedly . It says “ won’t” work not “ can’t “work . The only saving grace to section 8 is you get your money directly deposited into your account each month without having to go shake people down and hear excuses/lies  on the first .

Nathan Gesner · Answer

I will just add a couple things:

1. There's a lot more paperwork involved.

2. Section 8 tenants are (in my experience) not the greatest tenants. They are (in my experience) the kind of people that take advantage of others and refuse to take care of themselves, which is why they are on the public dole. I've discovered them moving people in. They've left homes trashed and filthy and full of stuff. They've worked jobs and been paid under the table so they can defraud the system. They claim they are unable to work but they have no difficulty posting selfies partying with friends, keeping up on their nails, hair, makeup, and tattoos, and have no problem getting pregnant. Most of them (in my experience) violate the lease regularly, cheat the system regularly, and cost you money in the long run.

3. Section 8 provides steady income but so do 90% of my regular tenants.

4. If your Housing office is run well, the caseworkers could be a big benefit. In my case, the Housing office is on the opposite side of the state and I have almost never been able to reach a caseworker or get a response.

In my experience.

Dennis M. · Answer

You sign up at the  voting booth !

Michael S. · Answer

@Bryce M. my first investment was a duplex with Sec 8 downstairs and traditional tenant upstairs. From day one upstairs was a pain. Each month was a new story about my rent being late or short or something. Downstairs Sec 8, no problem whatsoever.

There are good tenants on Sec 8 and bad tenants on Sec 8. There are good traditional tenants and there are bad traditional tenants. Try not to let the urban legends, stereotypes, and hasty generalizations cloud your decision-making.

I have several Sec 8 tenants. Not once have I heard a sob story about why my rent is late. I insure my properties are up to standards, and I have a mandatory inspection every year. I see these as good things. There’s extra upfront work, and the bureaucracy can be irritating. However, my outcomes have been stabilized units with a predictable direct deposit on the 1st of every month.

Irina Belkofer · Answer

She was offering to pay up the difference but in cash. I don't take cash especially without anyone knowing - I'd be on her hook. BTW, her income was good enough considering that voucher. That was the reason why I would take her - I can't discriminate against the source of income.

But I definitely don't need anyone tell me how much Rent should I charge - only market might.

Also, in these cheap location, there are plenty of applicants.

After reading these topics, I've got the time for inspection would be the vacancy as well. Why would anyone need that?

In cheap areas there is basicly no turnover time between Tenants - this one was empty because of eviction, but normally one moves out, next day another Tenant moves in

Jonathan R. · Answer

You can likely get above market rent in “the hood” too to make up for the extra repairs, even profit a bit from having to do them. Whatever you think the property should bring a month, put another 100 dollar bill on it. My first property was Section 8 by the way. I love the program and have continued buying more.

Bryce M. · Answer

@Nathan G. and @James Wise thank you, these great things to consider.

James Wise · Answer

Section 8 has it's pros & it's cons.

The rent is basically guaranteed which is an obvious plus. However getting the property approved with the program is time consuming & you'll usually need to do extra repairs annually to keep the home in compliance with Section 8 standards. I love Section 8 in the hood as the biggest issues with hood properties are finding tenants who will consistently pay their rent. If you've decided to go into the hood I think Section 8 is a must. If you are buying in nicer areas it's not really worth the hassle.

Are Sec 8 rentals a good place for new investor to start?

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