Section 8 in Indiana?

[Kent Depwe]

Hey BP,

Has anyone here had experience doing Section 8 in Indianapolis or anywhere in general? How has it gone? It seems like a great way to get near unbeatable cash on cash returns.

I am seeing $60-70k 3 bedroom houses that would rent for maybe $600-700 to a regular tenant but section 8 HUD FMR pays $1100 so they are cash flowing $500/month. Better returns than I'm seeing even in multi family and most of it is guaranteed.

Also if anyone has any Sec8 PM’s or banks that can bundle loans or have low loan limits I’m currently looking for those!

Thanks all any advice is appreciated!

[Richard Adjou]

Hi Kent,

I think Section8 is a great play if you have the patience to deal with a more challenging type of tenant. I manage property in Washington DC and nearly all of our tenants are Section8. Most tenants are tough on rental property but I would caution you to set aside some of the excess rents aside for reserves. This can go towards covering unexpected maintenance costs or damage to the property. Also keep in mind that it can be hard to collect from tenants that don’t always have the means to pay their own rent if and when things happen.

[Kent Depwe]

Quote from @Richard Adjou:

Hi Kent,

I think Section8 is a great play if you have the patience to deal with a more challenging type of tenant. I manage property in Washington DC and nearly all of our tenants are Section8. Most tenants are tough on rental property but I would caution you to set aside some of the excess rents aside for reserves. This can go towards covering unexpected maintenance costs or damage to the property. Also keep in mind that it can be hard to collect from tenants that don’t always have the means to pay their own rent if and when things happen.

Yeah definitely would lean on PM to deal with tenant side of things.
are you seeing solid cash flow/returns on the cheaper $70-80k sec8?

[Harvey Levin]

 Hi   we specialize in utilizing the Section 8 program in Indianapolis. I have been a landlord using section 8 since1985. In 2011 we started a PM company. It can be a great program but is also confusing. The rent amount you mentioned is not correct. The posted amounts include a landlord providing all utilites which we never reccomend. From what we are seeing a 60 to 70k 3 bed probably needs work or might be in a less desirable location. 3 to 4  years ago that price point was easy to find but current prices ( after repair) would exceed that amount. Send a DM  for more information. 

[Kristen L Garner]

Kent, I have a Section 8 property in Indianapolis. Happy to chat about my experience if you want to message me.  Having a team in place that understands the laws, inspections, etc. was crucial for me. I plan to add another to my portfolio later this year. 

I use Harvey Levin as my PM who I see in this thread. Hi @Harvey Levin !  His team is VERY experienced and knowledgeable in Section 8. 

[Tyler Lingle]

Would you treat a rental nice if you had it paid for by the government? IMO Section 8 is only something to do if you support the cause, low income housing. Otherwise it is a short term cash flow play for long term asset depreciation and lots of turnover. 

[Kent Depwe]

Quote from @Tyler Lingle:

Would you treat a rental nice if you had it paid for by the government? IMO Section 8 is only something to do if you support the cause, low income housing. Otherwise it is a short term cash flow play for long term asset depreciation and lots of turnover. 

[Jaron Walling]

@Kent Depwe Indianapolis has a lot of Sec 8 opportunities if your stomach can handle it. I agree with @Tyler Lingle. We both invest and have properties in same neighborhoods. Those $60-70K properties will need extensive rehab, or it's D class. If not those same properties are $120-150K in C/B class, in 2022. 

Nothing wrong with Sec 8 and it's a great for the community. People struggle with housing and we need to fill that niche. Just be prepared for tenants that can't afford to mow the grass, or change light bulbs. 

[Kent Depwe]

Quote from @Jaron Walling:

@Kent Depwe Indianapolis has a lot of Sec 8 opportunities if your stomach can handle it. I agree with @Tyler Lingle. We both invest and have properties in same neighborhoods. Those $60-70K properties will need extensive rehab, or it's D class. If not those same properties are $120-150K in C/B class, in 2022. 

Nothing wrong with Sec 8 and it's a great for the community. People struggle with housing and we need to fill that niche. Just be prepared for tenants that can't afford to mow the grass, or change light bulbs. 

[Harvey Levin]

Quote from @Tyler Lingle:

Would you treat a rental nice if you had it paid for by the government? IMO Section 8 is only something to do if you support the cause, low income housing. Otherwise it is a short term cash flow  play for long term asset depreciation and lots of turnover. 

Hi Tyler, I am curious how many Section 8 tenants you have had 1s hand knowledge of? I have almost 40 years of experience. The average tenancy is 3 to 5 years and then over 50% move into one of our other properties. Our attorneys tell us we have a significantly lower eviction rate than PM's in the same neighborhoods. The key is understanding how to properly screen and also how to manage. Now comparing a C class home with a B class of course the C class will have a higher repair factor but that is across the board no matter who the tenant is. C class renovations are of less quality than a B ( The cheap Lowes Commodes vs a decent American Standard for example) and in many Indy areas the C class homes we always a C class area and the original home was built cheaply. I have been a speaker for HUD out of the Washington DC office on Landlord issues with local housing authorities. At one symposium I was asked what is the difference between a Non Section 8 tenant and a Section 8 tenant. My answer was simple. "LUCK" if we are talking about a lower economic person all things being equal they come from the same tenant pool. As far as would you treat it nice if it was being paid for by the government.. yes, for many of these tenants this is the nicest home they have ever lived in and many keep the houses very nice. We just had a tenant move after living in the home since 2014. All we had to do was wipe down the walls and clean the carpet. Yes, cheap builder-grade carpet that after 8 years was still in good shape. Is this the exce[tion/ Of curse it is but I have lots of stories of how the tenants treat the home just like they own it. I do not see that very often in B-class rentals. I have more issues with prospective owners calling and saying they have a house they cant rent and want to use Section 8. When I ask where it is and why that cant rent it, I usually find it is either in a bad location or needs a lot of work. I also have clients that say why should I make the repairs. What do they expect for free? But yet the rent is paid in full every month so they expect the same as any other expects and deserves. Are they all fantastic tenants? No, but neither are all market tenants. Landlording is not a science, it is an experienced-based business. My almost 40 years of experience with Section 8 have proven that I have been very successful by renting to Section 8 tenants. In my personal residential portfolio, over 95 % of the C class units ( over 50) are Section 8. Currently, the rest started out as Section 8 but their income now exceeds the maximum limits. Treat the customer with respect, provide safe and desirable products, purchased at the right price and condition, provide quality management and anyone can be successful no matter what the product or market.

[Harvey Levin]

@Jaron Walling   your comment about not affording to mow the grass or change a light bulb means you are not choosing tenants on Section 8 with Income. That is a tenant screening issue. 

[Harvey Levin]

@Kristen L Garner  Thank you for mentioning us. We appreciate working with you.

[Gloria N Gear]

Mic Drop @Harvey Levin!!!-- I send all my investors that want to do Section 8 to him.  One example: one of my investors got a duplex with section 8 tenants in both sides.  One was an elderly couple, the other was a single man with a decent job, just not enough to keep up with bills.  My investor only had to do repairs from the section 8 inspection that he normally would need to do for the safety of his tenants.  After the covid lockdown of 2020, he called me and said to send him more section 8 type properties, because he never missed a payment.

[Kent Depwe]

Quote from @Harvey Levin:

 Hi   we specialize in utilizing the Section 8 program in Indianapolis. I have been a landlord using section 8 since1985. In 2011 we started a PM company. It can be a great program but is also confusing. The rent amount you mentioned is not correct. The posted amounts include a landlord providing all utilites which we never reccomend. From what we are seeing a 60 to 70k 3 bed probably needs work or might be in a less desirable location. 3 to 4  years ago that price point was easy to find but current prices ( after repair) would exceed that amount. Send a DM  for more information. 

 Hey Harvey,

I appreciate the insight! So to be clear the HUD FMR is only for landlords paying utilities? For example a 3 bedroom SFR in Muncie has an FMR of $1016/month. However you are saying that is if I pay the utilities which I obviously would not want to do. How much would I actually receive if I had tenant pay utlities (Gas, electric, etc)?

[Harvey Levin]

Quote from :

Quote from :

 Hi   we specialize in utilizing the Section 8 program in Indianapolis. I have been a landlord using section 8 since1985. In 2011 we started a PM company. It can be a great program but is also confusing. The rent amount you mentioned is not correct. The posted amounts include a landlord providing all utilites which we never reccomend. From what we are seeing a 60 to 70k 3 bed probably needs work or might be in a less desirable location. 3 to 4  years ago that price point was easy to find but current prices ( after repair) would exceed that amount. Send a DM  for more information. 

@Kent Depwe 

Hi, Sorry to make this confusing. The FMR includes the utility allowance. The amount for rent will be less the allowance. Then, there is an adjustment for the tenant's income and finally an adjustment for the area Fair Market Rent. Different Housing Authorities are offering incentives to Landlords currently. Indianapolis is offering to pay 110% of FMR. I do not invest nor manage in Muncie, so I am not aware if they are offering incentives

[Harvey Levin]

@Gloria N Gear  Thanks for all the referrals!!! 

[Kent Depwe]

Quote from @Harvey Levin:

Quote from :

Quote from :

 Hi   we specialize in utilizing the Section 8 program in Indianapolis. I have been a landlord using section 8 since1985. In 2011 we started a PM company. It can be a great program but is also confusing. The rent amount you mentioned is not correct. The posted amounts include a landlord providing all utilites which we never reccomend. From what we are seeing a 60 to 70k 3 bed probably needs work or might be in a less desirable location. 3 to 4  years ago that price point was easy to find but current prices ( after repair) would exceed that amount. Send a DM  for more information. 

@Kent Depwe 

Hi, Sorry to make this confusing. The FMR includes the utility allowance. The amount for rent will be less the allowance. Then, there is an adjustment for the tenant's income and finally an adjustment for the area Fair Market Rent. Different Housing Authorities are offering incentives to Landlords currently. Indianapolis is offering to pay 110% of FMR. I do not invest nor manage in Muncie, so I am not aware if they are offering incentive

interesting, bummer utilities come out that cuts out some serious cash flow. Great to hear about Indy, just shot you a text!

[Regina Sloan]

From the folks I have talked to that have, they are their easiest tenants and guaranteed money. No personal experience though. 

[Sam Epperson]

Just to piggyback on this thread -- I'm seeing a listing in indiana of a portfolio of houses. Most tenants are Section 8 already, but their rents are very low considering both the market and vs HUD's Fair Market Rents.

If i purchased the property and raised the section 8 tenant rents to the FMR, does this have a major effect to the tenant? Is the program likely to pay the difference between their old rent and the new? I don't want to push out all the tenants, but i'm looking for a way to increase this property's value.

example: Section 8 tenant is paying $750. the FMR in the county is $1100.

[Harvey Levin]

A mistake Investors often make is thinking that the HUD FMR applies to every property of that bedroom size. Usually, the FMR includes the utility allowance which would need to be deducted in order to come up with actual rent. If it is not included then move to step 2. Step 2 is that each tenant qualifies for a Maximum rent that is based on family size and Income. This can actually be higher or lower than the FMR without utilities however the rent still should be no greater than FMR (note that in periods of low landlord participation, some housing authorities may offer an incentive of 10-20% OVER the FMR to entice landlords. ) Step 3 is that each property may qualify for a different amount based on amenities and type of utilities. For example, in Indianapolis, all-electric homes have a higher utility deduction because electric heat, water heating, and stoves cost more to operate than gas. This reduces the amount available for rent. Step 4 FMR is actually based on the location and condition, not the city. Usually, the inspector will run comps to approve or adjust the FMR for the specific unit. Depending on the Housing Authority this process may apply to move In rent and renewals or may only apply to Move In. If it does not apply to renewals there can also be a difference based on each Housing Authority. Some may have a maximum increase allowed each year. Others may allow whatever the landlord wants so long as the tenant agrees. Section 8 is a HUD-funded program but there are no universal regulations. Each Housing Authority may file an Administrative Plan up to 1 time per year to modify the Section 8 HUD guidelines. As to how much a tenant would pay for the rent increase ..it depends. We just had an increase of over 15%. Part of the increase was paid by the Housing Authority but the tenant portion increased from $33 to $88 per month. If the tenant complains we have to decide if it is worth lowering the rent increase. I am having a discussion with a supervisor to determine the maximum increase where the tenant's portion will only increase to $50 per month as that is what the tenant is comfortable with and we prefer to keep this tenant long-term. My recommendation is to ask for a meeting with the local Housing Authority and ask them to help you understand how they operate. Get to know the Supervisors in Finance, Inspections, and Housing Specialists (caseworkers). Once you fully understand what the regulations are that apply to your specific Housing Authority it becomes much easier to be a Section 8, Landlord. Also do not be afraid to push back when you see that the Housing Authority has made a mistake. It happens often!

[Sam Epperson]

thanks for the reply! if the HUD's FMR for the area is $1300, but the current landlord is only charging $750, what's the likelihood that an increase to the 1300 rate is approved? would there be any reason that i couldn't raise rents to the FMR?

[Harvey Levin]

Quote from @Sam Epperson:

thanks for the reply! if the HUD's FMR for the area is $1300, but the current landlord is only charging $750, what's the likelihood that an increase to the 1300 rate is approved?

 Each housing authority is different. In Indy you can raise to fair market rent. However the tenant must sign the rent increase request. Also increase can only be once each 12 months. Some housing authority have additional rules on timing