Looking to buy investment property

[Nakul Patel]

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

[Jackson Ebersole]

Hello and welcome! Here's some guidance on buying your first investment property in Southern California or Columbus, Ohio:

Down payment:

• For investment properties, lenders typically require 15-30% down payment on your first investment
• 15% down is possible with excellent credit (700+ score)
• 20-25% down is more common, especially for multi-unit properties

Section 8 considerations:
Pros:

• Guaranteed portion of rent from government
• Potential for longer-term tenants
• May be easier to fill vacancies in some areas

Cons:

• More paperwork and inspections required
• Rent amounts set by local housing authority
• Potential property damage concerns

Other tips:

• Research local markets carefully - price trends, rental rates, etc.
• Factor in all costs - taxes, insurance, maintenance, vacancies
• Consider starting with a single-family home or small multi-unit
• Build a team - real estate agent, property manager, contractors
• Have cash reserves beyond just the down payment
• Understand landlord-tenant laws in your chosen location

I'd recommend talking to local real estate agents in both areas to get more specific market insights. Starting with a private lender loan and standard tenants may be simpler for your first property. Let me know if you have questions on funding and I will be happy to talk to you.

Best,

Jackson

[Evan Hopple]

Hi @Nakul Patel, welcome to BP

I can't speak for California, but you don't have to market specifically for Section 8 tenants in Ohio. Individuals with a Section 8 voucher will typically seek the nicest housing that does not exceed their voucher limit. Wherever you invest, I recommend hiring a property manager who is highly knowledgeable about Section 8 and its frequently changing guidelines.

Putting down at least 20% ensures the best rates and avoids any PMI payments.

Good luck!

[Remington Lyman]

Quote from @Nakul Patel:

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

It's beneficial to target both Section 8 tenants and self-pay tenants. This expands your possibilities. You can make a 15% down payment on 1-4 unit investment properties. You just need to know which lenders to approach.

[Mike Paolucci]

Quote from @Nakul Patel:

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

 Hi @Nakul Patel. I'm originally from San Francisco CA (started off as an out of state investor in 2021) and have no desire to become a landlord in CA. Here's why (coming up on the November ballot for CA)--> "Justice for Renters Act"

I'm a fan of Section 8 and have couple section 8 rentals. 

Pros
- Guaranteed money from the govt that you won't have to chase down your renters for. 
- Tenants are incentivized to not damage the property (can lose their voucher if they are found liable)
- In my experience, tenants tend to stay for longer periods of time rather than non-section 8 tenants

Cons
- The unit is required to meet a certain standard and pass an inspection prior to tenant occupying the unit 
- Tenants tend to have a lower credit score than most landlords were prefer 

Happy to connect and share my experiences as an out of state investor and share some additional tips. 

[Benjamin Aaker]

For your first investment property, I'd stick with marketing to standard tenants rather than Section 8. As you gain experience, your might change your marketing strategy. Part of that experience might be that you rent to a S8 tenant to learn about it. There are more requirements that makes for more work and more potential liabilities for you.
Down payment will depend on the bank, but generally an investment property will need a commercial loan. In my experience, it'll be 20% down.

[Ryan Cheek]

Hey there! Welcome to the investment world, and congrats on taking the first steps!

When it comes to renting to Section 8 (S8) tenants, there are definitely pros and cons to consider:

Pros of S8 Tenants:

• Guaranteed Rent: The government will pay a portion (sometimes all) of the rent, so you'll have consistent cash flow.
• High Demand: There's often a waiting list for S8 housing, meaning less vacancy time.

Cons:

• Property Inspections: Your property will need to pass regular inspections, and repairs/maintenance must meet specific standards.
• Tenant Screening: Just like with non-S8 tenants, tenant quality can vary, so thorough screening is still essential.

As for the down payment, yes, most lenders will require 15-25% down for investment properties. The exact percentage depends on factors like your credit score, the type of loan, and whether you’re buying single-family homes or multi-units.

A few tips:

1. Research both markets thoroughly (Southern California vs. Columbus, OH) in terms of cash flow vs. appreciation. Columbus might offer better cash flow, while SoCal could appreciate faster.
2. Consider your property management strategy—if you're not local to the property, having a reliable manager in place is crucial, especially with S8 tenants.
3. Crunch the numbers: Make sure the deal works in your favor with or without S8 tenants, factoring in all expenses, vacancy rates, and maintenance costs.

Hope this helps! Best of luck on your first investment!

[Nakul Patel]

Quote from @Benjamin Aaker:
For your first investment property, I'd stick with marketing to standard tenants rather than Section 8. As you gain experience, your might change your marketing strategy. Part of that experience might be that you rent to a S8 tenant to learn about it. There are more requirements that makes for more work and more potential liabilities for you.
Down payment will depend on the bank, but generally an investment property will need a commercial loan. In my experience, it'll be 20% down.

Thank you ! 

[Nakul Patel]

Quote from @Ryan Cheek:

Hey there! Welcome to the investment world, and congrats on taking the first steps!

When it comes to renting to Section 8 (S8) tenants, there are definitely pros and cons to consider:

Pros of S8 Tenants:

• Guaranteed Rent: The government will pay a portion (sometimes all) of the rent, so you'll have consistent cash flow.
• High Demand: There's often a waiting list for S8 housing, meaning less vacancy time.

Cons:

• Property Inspections: Your property will need to pass regular inspections, and repairs/maintenance must meet specific standards.
• Tenant Screening: Just like with non-S8 tenants, tenant quality can vary, so thorough screening is still essential.

As for the down payment, yes, most lenders will require 15-25% down for investment properties. The exact percentage depends on factors like your credit score, the type of loan, and whether you’re buying single-family homes or multi-units.

A few tips:

1. Research both markets thoroughly (Southern California vs. Columbus, OH) in terms of cash flow vs. appreciation. Columbus might offer better cash flow, while SoCal could appreciate faster.
2. Consider your property management strategy—if you're not local to the property, having a reliable manager in place is crucial, especially with S8 tenants.
3. Crunch the numbers: Make sure the deal works in your favor with or without S8 tenants, factoring in all expenses, vacancy rates, and maintenance costs.

Hope this helps! Best of luck on your first investment!

Thank you ! 

[James Wise]

Quote from @Nakul Patel:

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

 Welcome aboard.

[Sam McCormack]

Quote from @Nakul Patel:

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

 Hey Nakul! 20% is the absolute minimum I have seen for non owner occupied properties, 25% down is the most common, and what I would say to expect for a lender to require. 

S8 is good because you are "guaranteed" getting your rent every month, they are held to standards that normal tenants aren't, you can get way higher rent, and more. They are generally conceived as bad, with exceptions to people having nightmares, but most of that likely has to do with bad screening. 

[Lucia Rushton]

@Nakul Patel I know of a property in Southern California that needs some work on it. Send me a DM and I’ll make the connection for you.

[Michael Smythe]

S8 is just trading one set of tenant problems, for another set.

It is NOT a cure-all!

[Min Zhang]

If you are looking into Section 8, I recommend you check the Columbus market. Any C-class neighborhoods are more geared towards Section 8 and long term renters. Let me know how I can help Nakul!

[Jake Andronico]

@Nakul Patel

Welcome to BP! SoCal and Columbus OH are two incredibly different markets. 

People are having success and failure in every market. 

If you have enough money to purchase something in So Cal, I'd recommend exploring the option of purchasing something elsewhere potentially in cash. 

We've seen some pretty amazing deals on market from sellers who just want to offload their property here in Reno, NV. 

Section 8 has pros and cons. A lot of investors in here that specialize in it. Some helpful responses with the positives and negatives above. 

[Patrick Drury]

@Nakul Patel
If you are looking to invest in 2-4 units you'll have to put down 25% if you plan to get a conventional loan. You could get away with 20% down with DSCR the rate will just be a bit higher.

[Jimmy Lieu]

Quote from @Nakul Patel:

Hello All,

Excited to be here. Looking for guidance on buying our first investment property in Southern California or in Ohio (around Columbus)  to start off with . 

Should we buy and market for S8 tenant or without ? Pro and/or Cons to consider ? 

Is it required to put down 15-25% down payment for investment homes ? 

Any other guidance and/tips will be greatly appreciated ! 

Hi Nakul! If you're looking into Columbus OH, you can make 15% down payment depending on the lender you will use. Pros and cons have been mentioned already and I agree with them - as an investor who owns Section 8 properties. I do personally think that Section 8 can be a great investment if tenants are screened properly. But for your first, I would suggest aiming for a turnkey or minor rehab properties and marketing them to self-pay tenants. Happy to connect and answer any questions you may have!