Best are to buy rental properties in for Section 8 tenants?

Question

Hi y'all,

Any tips for places I should start looking into for properties to buy to then rent out to section 8 tenants? I've read about Cleveland, OH, Indianapolis, IN, Racine, WI, and Detroit, MI. Can anyone tell me if these areas are good places to do so based on experience? Any other places you can recommend are welcomed!

Thanks,

Rich

Drew Sygit · Answer

Everyone thinks they can easily target S8 tenants for their rentals, failing to realize that there is a LOT of competition for them!

Harvey Levin · Answer

@Richard Pallarino  Hi  I have been an Investor and PM in Indianapolis with a Section 8 focus since 1985. It has been very profitable for me.

James Wise · Answer

People often try to compare Section 8 tenants vs regular tenants. You get a lot of people saying Section 8 tenants are tourble or Section 8 tenants are bad.

When doing this people are missing the ball.

It's not Section 8 tenants vs regular tenants. It's having a rental in the ghetto vs not having a rental in the ghetto. If you buy a rental in the ghetto, you're going to get higher risk tenants. When dealing with a risky tenant pool, going with Section 8 reduces your rick because the tenants not paying the rent is the biggest risk you face when you've got a house in the ghetto.

Rich Hupper · Answer

I wouldn't aim your rental goals for one specific group. I would create quality housing, openly market it and then whoever is the best applicant based on their financials should get it. Remember if you invest in your rental you will have something that you can turn over quickly, when a tenant leaves. Also tenants will take more care of units that they are proud to live in.

Some section 8 vouchers will pay market rates, some won't. Don't worry unless you completely overprice the rental.

Account Closed · Answer

My company invests heavily in section 8 in Kansa City, MO. Shoot me a DM if you'd like more info on that market.

Harvey Levin · Answer

In Indy most Section 8 rentals are not in the ghetto. They are in C or C+ areas.  We do not really have ghetto areas. yes, we have D-class war zones but Section 8 tenants do not move into those.  I prefer Section 8 in C Class (since 1985) because the tenancy typically is much longer than the market. Market tenants tend to move or buy houses as their  Income gets better. Most Section 8 tenants do not see incomes rise for very long.  They value having a nice place to live as they know there is not an abundance of landlords who will rent to them. I am only speaking for Indy as Section 8 as well as most aspects of Real Estate is different in each location.

Scott Mac · Answer

Rather than just look at the city--also look at the neighborhoods...(which I think is what @James Wise is talking about).

One thing to keep in mind is that "Poor People" (yes I know, Escalades and nails and etc...) will be happiest (stay longer) in a neighborhood where they have the services they need, such as clinics, liquor stores , pawn  shops, buy here pay here, rent to own--type of shops, vs. higher end things, like Neiman Marcus, where they can't afford to buy anything.

So while " the Blue Man" touched on staying out of the very low end areas of the ladder of success, staying out of the higher ends of the ladder is also a prudent move for section-8--because they are priced out of the sales and services in the higher end areas.

Some footage from Detroit (note the businesses you see and the ones you don't see): https://www.youtube.com/watch?v=03AHbGVtq_c

Good Luck!

Richard Pallarino · Answer

@Mike D'Arrigo section 8 in C class and some B class neighborhoods tend to have higher rents. Also guaranteed

Mike D'Arrigo · Answer

@Richard Pallarino I agree with @Rich Hupper. Why are you limiting yourself to Section 8 tenants? I can't speak for Racine or Detroit, but there are plenty of good areas in Indianapolis and Cleveland where can get market rent tenants.

Vanessa Regalado · Answer

@Richard Pallarino @Rich Hupper has a great answer for you. Portfolio diversification is key in any State. NJ had a delay in Section 8 payments a few years ago in which some landlords were not paid for 3 months due to system issues. 3 months ago one of our largest housing authorities computer system was hacked causing major delays in applications, lease renewals, inspections, etc. Also, HUD can audit your rental portfolio to ensure that you are providing equal housing opportunities to all applicants and not only a demographic group.

Best are to buy rental properties in for Section 8 tenants?

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