Section 8 Vs Traditional Tenants In Philadelphia

Real Estate Agent · Philadelphia, PA · Member since 2022 · 58 posts · 40 votes

I have talked to 20 plus investors in the last week considering switching from traditional tenants to section 8. I am a huge believer in the section 8 route, but love to hear any other takes on pros and cons.

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Eric Greenberg

Investor · Philadelphia, PA · Member since 2019 · 618 posts · 430 votes

I dont have any personal experience but have always been interested in the better group zip codes. From talking with a few local folks my take away is the numbers published is the very highest amount you could get and isnt always what you will get.

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Sebastian Bennett
Investor · Bucks County · Member since 2023 · 196 posts · 156 votes
2y
What neighborhoods are these investors portfolios located in? If I had to guess, I would expect D neighborhoods at best. Chasing cash flow in these neighborhoods is rarely a viable business model as I've learned. This is what attracted me to real estate in the first place. I thought I could grow a portfolio of cash flow producing real estate in lower tier neighborhoods but after speaking with a number of people through this platform and elsewhere, its a losing proposition. You are basically investing in a business, not real estate at that point.
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Eric Tullius
OP
Real Estate Agent · Philadelphia, PA · Member since 2022 · 58 posts · 40 votes
2y
Quote from @Sebastian Bennett:

What neighborhoods are these investors portfolios located in? If I had to guess, I would expect D neighborhoods at best. Chasing cash flow in these neighborhoods is rarely a viable business model as I've learned. This is what attracted me to real estate in the first place. I thought I could grow a portfolio of cash flow producing real estate in lower tier neighborhoods but after speaking with a number of people through this platform and elsewhere, its a losing proposition. You are basically investing in a business, not real estate at that point.
Really all over the Philadelphia area. The 19146 zip code is probably one of the hottest currently, being group 4. There is plenty of off market inventory with 2 beds getting $2580 and 3 beds getting $3120. I know there are caveats to the full voucher but a good amount of these properties all in costs are well below $200k.
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Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
2y
Bigger risk, bigger reward - but only from a Cash flow perspective.
Typically as Sebastian said these are D class or C class at best.
While you might be getting a better return on cash flow you are not investing, you are buying a business. It will demand more of your time.
These properties will not appreciate as well as others in better areas, so you lose on that too.
Cash flow is one piece of the puzzle. Typically I don't argue with people on it, I just tell them to do it if they don't want to hear my points. After sometime I hear the horror stories I have always heard.
I've managed A and D class real estate. I prefer A/B any day.
[email protected]267-767-0111
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Eric Greenberg
Investor · Philadelphia, PA · Member since 2019 · 618 posts · 430 votes
2y
I dont have any personal experience but have always been interested in the better group zip codes. From talking with a few local folks my take away is the numbers published is the very highest amount you could get and isnt always what you will get.
3 Reply
Sebastian Bennett
Investor · Bucks County · Member since 2023 · 196 posts · 156 votes
2y
Yes, as Eric says, the homes have to have all of the bells and whistles and even then you sometimes get screwed and don't get the rent value's you are seeking. I am not sure if there is an appeal process or if you are then stuck with that rent value. Seems to be quite a risk not being able to set your own rent.
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Calvin Thomas
Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
2y
Much of Philly is a sh!tpit; so be careful. If they lose their stipend; you have to go through a very unfriendly eviction process. They also destroy the property; possibly even steal the copper. Worse than Albany or South BX.
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Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
2y
Quote from @Calvin Thomas:

Much of Philly is a sh!tpit; so be careful. If they lose their stipend; you have to go through a very unfriendly eviction process. They also destroy the property; possibly even steal the copper. Worse than Albany or South BX.

Great, point, if they need to be evicted, consider your place and all the renovation trashed.
Had a seller who offloaded 5 rentals that he has evictions with from Section 8 tenants. Had he left them vacant for 5 years and collected no rent, he would've earned more...
[email protected]267-767-0111
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Catherine McElwain
Investor · West Chester PA, USA · Member since 2019 · 27 posts · 17 votes
2y
Can we talk about Section 8 a little more here? Now that it has been 6 months since the voucher amount increases, what has changed for people? Are there "enough" Section 8 approved rentals? Is anyone actually getting towards the top end of the voucher max? Are any investors seeing any benefits with the voucher amount increase?
Who out there is doing this in Philly?
We have one Section 8 property in West Chester and it's been great. Vetting the tenant seems to be the biggest predictor of success.
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Calvin Thomas
Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
2y
Quote from @Catherine McElwain:

Can we talk about Section 8 a little more here? Now that it has been 6 months since the voucher amount increases, what has changed for people? Are there "enough" Section 8 approved rentals? Is anyone actually getting towards the top end of the voucher max? Are any investors seeing any benefits with the voucher amount increase?
Who out there is doing this in Philly?
We have one Section 8 property in West Chester and it's been great. Vetting the tenant seems to be the biggest predictor of success.

West Chester is a bit different than Philly. I stand by what I said; most of Philly is a dump; and I own property around Temple. There's maybe a handful of neighborhoods worth it's spit in Philly. As for section 8, there's ups and downs. The downs, usually are worst than the ups. Market is always better than gov't sponsored. You just need one bad tenant and you'll know why. All my tenants are students. I have the parents co-sign and I and additional landlord insurance to cover any f*ck-ups they do.

Works like a charm.. Usually.
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