Starting out and need some advice

4 Replies

Hello,

My mother, brother and I are looking to start investing in multifamily properties, quadplex to be more specific. I came across a quadplex in my area that looks to be a good deal. I have put it in the calculator and done all the math. I will be doing a VA loan and one of the units I will live in for the 1st year. There is already 3 tenants living there and have been for years. The problem (I think) is 2 of the tenants living there are section 8. Is that a problem and should I go for it? the one non section 8 is paying the least amount in rent. Without reno, increasing the rent or negotiating a lower deal (of course I will go in lower then asking price), for the 1st year its almost a break even after all expenses. The part that I like is after I move out the 4th rent is all profit. Any help or suggestions would be greatly appreciated.

@Stian Jones So the first duplex I ever bought, I realized one of the tenants was Section 8 after we were under contract, and close to closing. I was upset that it wasn't disclosed, or more like that I didn't figure it out on my own through my own due diligence. The truth is, I had no experience in being a landlord and assumed the worst when it comes to Section 8. I closed on the property and she is with me six years later and is one of my best tenants. Especially with the COVID shutdowns, having some section 8 tenants has been a good hedge against more traditional renters that have stopped paying and/or lost their jobs. I now currently seek out more Section 8 tenants.

So short answer, my opinion is that section 8 is neither good or bad, it just is. Definitely not a reason for me to run from a deal, and frankly quite the opposite. That has been my experience at least. 

@Brent Kiger , Thank you so much for your advice. Being new to this it bothered me and especially because I found it fairly quick. I didn't want to jump on the first opportunity that I thought was a good deal, but I also didn't want to lose a good deal. 

@Stian Jones , I'm with Brent - Section 8 isn't a reason on its own to run from the deal.

Managing Section 8 rentals is different than market tenants simply because you have a 3rd party setting rules and paying some or all of the rent for those tenants.  They have their own processes and rules for you to follow, as well as the tenant.  But the beauty of Section 8 is that the Section 8 paid portion is guaranteed and that 3rd party means that you have an added layer of accountability in the Housing Authority, as long as you learn how that works and utilize it to your advantage when necessary.

It sounds like your Section 8 units are higher than the market one but there should also be a process with the local Housing Authority for increasing rents probably annually.  Figure out this process and follow it and you should get consistent increases to help you stay in line with market rents.

Congrats and good luck.

@Jennifer Donley , Thank you so much for your input. Really great advice and I will definitely educate myself on section 8. This small scare/hesitation is turning out to be a potentially great positive. I greatly appreciate your advice.