Section 8 is a department in the Housing and Urban Development (HUD) that provides housing to low-income individuals through rental assistance. In times where the economy may be down or the housing market isn’t great, Section 8 Housing can be a smart option for real estate investors. I find it particularly relevant during the COVID-19 crisis that is going on right now.
Why You Should Consider Investing in Section 8 Housing
How it Works
A potential tenant receives a housing voucher, usually based on approval for the number of bedrooms. The particular housing voucher is good for about 60 days and that tenant has to go out into the open rental market and find a property. As a landlord or a property owner, the first thing you ask to see is that voucher as it tells you how many bedrooms that person is approved for–and thereby how much rent is going to be paid by the housing authority.
Here’s the nugget about Section 8 Housing: the administration of the housing vouchers is all local. It’s funded by the federal government, but the administration of funds and vouchers is local. So if you’ve had a bad experience with Section 8, then I suggest trying a different location. I personally had a horrible experience in a county in Texas because of the director of the housing authority. But HUD actually got rid of him. Since then their program has made a 180-degree turn-around, and I was able to find a lot of success in this area.
So look for an aggressive housing authority–then you have a chance to find a premium in rents. You do have to manage a little more tightly, but I have owned properties and it’s worked successfully for me.
Advantage 1: Government pays the rent
The government pays most-to-all of the rent, but in many cases, the tenant has to pay up to 30% of their income. The nice thing is that the housing authority actually mails you (or your management company) the rent at the first working day of every month. Whatever the tenant has to cover is usually very small and manageable. This means that your income on that property is pretty much guaranteed. You don’t have to worry about tenants paying late for the most part.
Advantage 2: Steady stream of tenants
You don’t have to sell it when you’re renting a property because there is built-in demand. Through the Section 8 program, potential tenants are actually pointed towards your property. When I owned Section 8 housing, we would put ads in the newspaper saying that we had a property approved for Section 8 tenants. Now, the local authority markets your property to potential tenants.
Advantage 3: Section 8 tenants are longer-term than normal tenants
I have some tenants who have been in my properties for 5-10 years! Those long term tenants do a better job of taking care of the property because they know they’ll be living in your property for a longer period of time. They typically take ownership of what the space looks like, which lowers your repair costs, and you have no vacancy.
Advantage 4: Less competition with other investors
A lot of investors are scared of Section 8 Housing. This can be because either they’ve had a bad experience or have heard of bad experiences from other investors. But I chuckle at this because of what I told you before: administration is all local. Investigate the housing authority before you make your move. It could be one of the best decisions you make in your real estate career.
Advantage 5: Reimbursement for damages caused by the tenant
Most of the tenants who rented Section 8 from me rarely had any damages. This can happen since the housing authority itself is actually funding the particular cost of what those damages were. This won’t always happen, and it might not be 100%, but it is certainly an advantage.
f you’re serious about investing in your future, I hope you consider attending my Real Estate Workshop this June. I host this workshop twice and year. At the end of every event, I have attendees walk out the door and email me years later with a list of properties they have successfully invested in. I’m not telling you this to boast but rather show you that anyone has the ability to better their future. When you invest in real estate, you not only set yourself up for financial freedom but you also give yourself the ability to build wealth for the kingdom. Join me, Bill Bronchick, Karen Conrad, Dan Dyer, Mike Davis, and Chris Barnard on the weekend of June 12-14th in Denver, Colorado to learn more about how you can become an expert real estate investor. Click here for more information and to purchase your tickets.