To Section 8 or Not to Section 8

[Dan Powers]

Every rental investor always stresses about wanting the maximize cashflow, and the clear answer to that is Section 8. While on the surface of examining the rents in the most popular zip codes (19143, 19139, 19142) might show Section 8 rents identical to market, that being said the conditions needed to reach that rent are drastically different. To reach market rent in West Philly you'll most likely need central AC, stainless steel apps, and near flip finishes throughout. In comparison, for Section 8, you really only have to finish the home to pass inspection, or play the fun game of going to Home Depot and buying the cheapest finishes you can. This is really where you make your money in Section 8.

There are still parts of the city where Section 8 rent is higher than market (19121, 19132, 19133, and 19140), but it’s extremely block by block to say the least. That being said, your margins are significantly better because the entry price is drastically lower than West Philly, with most properties selling around 50-80k while rent is $1200.

I would love to hear why people are reluctant to rent Section 8 especially if you get a solid property manager to handle everything.

[Kevin M.]

I am a property manager and we deal with a handful of Section 8 properties. The numbers may look fine but they don't paint the whole picture.

The organization is very difficult to deal with. They are strict about holding property owners accountable but not tenants. They are not responsive through email, hostile toward property owners, and simply inept. 

The rent money is not 'guaranteed'. In fact our S8 rent is less reliable than our market properties. If a tenant doesn't permit entry for the inspector- they withhold rent. If PHA finds unreported income for your tenant- they withhold rent. If you properly terminate a lease at the end of the term but the tenant simply stays- the program stops paying rent.