Real Estate Deal Analysis & Advice
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated about 7 years ago, 11/03/2017
Never done a Section 8 Deal, but an opportunity has surfaced
3 duplexes right in a row in a C+ / B- neighborhood.
ALready pre-approved for Section 8 at $550 per month.
All 3 duplexes for $190,000
Currently livable but have some opportunity to improve them. 4 of the 6 are currently rented.
Thoughts? What am I not thinking about regarding section 8 that would maybe make this a bad deal?
Property has been on the market for about 150 days and has dropped in price almost $50,000. (<- seems like a giant RED flag)
I don’t think section 8 would make it a bad deal. Not to say that all Section 8 tenants are great, but neither are all market rent tenants. I would put in an offer subject to inspection, financing, and proof of full and timely rent payments for the past year. There is nothing inherently wrong with section 8 other than the annual inspections, which keep owners from letting their properties deteriorate. If you were planning on keeping up with it anyway, it shouldn’t be an issue. If you haven’t already, pick up The Section 8 Bible vol. 1 & 2. Great info and very entertaining!
Originally posted by @Matt Leonard:
I don’t think section 8 would make it a bad deal. Not to say that all Section 8 tenants are great, but neither are all market rent tenants. I would put in an offer subject to inspection, financing, and proof of full and timely rent payments for the past year. There is nothing inherently wrong with section 8 other than the annual inspections, which keep owners from letting their properties deteriorate. If you were planning on keeping up with it anyway, it shouldn’t be an issue. If you haven’t already, pick up The Section 8 Bible vol. 1 & 2. Great info and very entertaining!
Thank you for your perspective. Very much appreciated and I like the book suggestion.
Originally posted by @Matt Leonard:
I don’t think section 8 would make it a bad deal. Not to say that all Section 8 tenants are great, but neither are all market rent tenants. I would put in an offer subject to inspection, financing, and proof of full and timely rent payments for the past year. There is nothing inherently wrong with section 8 other than the annual inspections, which keep owners from letting their properties deteriorate. If you were planning on keeping up with it anyway, it shouldn’t be an issue. If you haven’t already, pick up The Section 8 Bible vol. 1 & 2. Great info and very entertaining!
Also, it doesn't have to be Section 8. I'm not sure anyone in it is currently a Section 8 tenant. On something that rents this low, I tend to start thinking about going that direction as an option.
I own 2 x Section 8 fourplexes. And I’m about to pick up 2 more on the same street.
One thing to consider is supply vs. demand. I spoke to a few property management companies in my target area, and they get 3-4 calls every day from people looking for section 8 housing. After researching more, it turns out there are almost 1000 govt. pre-approved renters in my area - and not enough houses for them all. There’s a wait list!
With not much supply in my area, I don’t have to worry about vacancies, and, I can screen for higher quality tenants.
Not sure of your area, but something to think about.
Good luck!
Originally posted by @Joel O'Leary:
I own 2 x Section 8 fourplexes. And I’m about to pick up 2 more on the same street.
One thing to consider is supply vs. demand. I spoke to a few property management companies in my target area, and they get 3-4 calls every day from people looking for section 8 housing. After researching more, it turns out there are almost 1000 govt. pre-approved renters in my area - and not enough houses for them all. There’s a wait list!
With not much supply in my area, I don’t have to worry about vacancies, and, I can screen for higher quality tenants.
Not sure of your area, but something to think about.
Good luck!
Thanks Joel. If your Section 8 tenant trashes your place, does the govt kick anything in or is that all up to the owner?
What else does the government do besides mail the check? I believe they do an annual walk through of the tenant's home. Do they screen the tenant in any way? what else?
The government doesn’t pay for trashed units. Or, any maintenance at all. They do a semi-annual walk through of each unit to make sure a) the tenant is living by the rules and b) the landlord if providing a quality residence. These checks keep both sides honest.
The Sec. 8 approved tenants have a record kept by the govt. that they have to maintain in good standing or they will be kicked out of the program. If they trash a unit, they can’t re-qualify and that’s it. Most Sec 8 tenants don’t abuse the system and are truly trying to earn more and get off the program and afford their own place. Given the huge waiting list in my area, once a tenant is in, they don’t want to screw it up and start from scratch again. Of course, there’s always bad apples.
So, there is some ‘screening’ by the govt. but you should definitely do your own full screening too. You don’t have to rent to anyone you don’t want (At least in my state). You can make these guys meet the exact same criteria you would any other tenant.
The rent is NOT guaranteed! Don’t think of it as guaranteed money because the govt can take away or reduce their subsidy for a tenant for many different reasons. For example, if a tenant gets a pay raise at their job, perhaps the government might lower their contribution by $50/month. In this case, the tenant would have to pay the missing portion usually covered by the govt.. If the tenant doesn’t save and plan accordingly, you’re going to have an issue on your hands!
Anyone considering Sec 8 housing might want to consider consulting with a property manager who is experienced in managing houses or units under the program.
PS I’m by no means an expert- would love to hear others who currently own Sec 8 housing and how it’s going.
Cheers!
well, here's a link that you might want to check out. plug in the city & state where you're interested in securing section 8 tenants in and it will display the budget for that area for 2018. this way you can get somewhat of an idea of what you'd be working with...
https://affordablehousingonline.com/FY18-HUD-Budge...
kudos,
Mary
Originally posted by @Joel O'Leary:
The government doesn’t pay for trashed units. Or, any maintenance at all. They do a semi-annual walk through of each unit to make sure a) the tenant is living by the rules and b) the landlord if providing a quality residence. These checks keep both sides honest.
The Sec. 8 approved tenants have a record kept by the govt. that they have to maintain in good standing or they will be kicked out of the program. If they trash a unit, they can’t re-qualify and that’s it. Most Sec 8 tenants don’t abuse the system and are truly trying to earn more and get off the program and afford their own place. Given the huge waiting list in my area, once a tenant is in, they don’t want to screw it up and start from scratch again. Of course, there’s always bad apples.
So, there is some ‘screening’ by the govt. but you should definitely do your own full screening too. You don’t have to rent to anyone you don’t want (At least in my state). You can make these guys meet the exact same criteria you would any other tenant.
The rent is NOT guaranteed! Don’t think of it as guaranteed money because the govt can take away or reduce their subsidy for a tenant for many different reasons. For example, if a tenant gets a pay raise at their job, perhaps the government might lower their contribution by $50/month. In this case, the tenant would have to pay the missing portion usually covered by the govt.. If the tenant doesn’t save and plan accordingly, you’re going to have an issue on your hands!
Anyone considering Sec 8 housing might want to consider consulting with a property manager who is experienced in managing houses or units under the program.
PS I’m by no means an expert- would love to hear others who currently own Sec 8 housing and how it’s going.
Cheers!
How did you determine there's a waiting list in your area? That would be good information to know
I found out by calling around to property management companies and asking if they had any Section 8 housing available. Pretty soon i realized the high demand and low supply.
Check this out: https://affordablehousingonline.com/housing-help/W...
Search your city on the main page: https://affordablehousingonline.com/
This lists the wait list preferences, income limits, subsidy amounts, and best of all... it shows the county office contact information who you can call and ask questions. :)
Good luck!
The BiggerPocket's newsletter email I received today had an article on this very same topic:
There's a reason why professional PM's don't want to deal with section 8; it's because the program sucks, dealing with the housing offices suck and to a great degree the residents suck. Done hundreds of section 8 over the last 24 years and I don't touch them now. All that should matter is this: do you want to be in partnership with the US government to be a landlord and for your ultimate financial freedom?
