2 or 3 bedrooms for Section 8?

Question

Hi All,

Are 2 bedroom or 3 bedrooms a better investment for Section 8 rental properties? I know 3 bedrooms get higher rent but, based on things I've read/heard, I'm under the impression 2 bedrooms are in higher demand for Section 8 tenants. I'm in Baltimore. Also, two bedrooms cost less to renovate.

Peter Forrest · Answer

@Daniel Alfandre I have section 8 units in Baltimore and Wash DC. In general, my 3-beds fill faster than 2 beds, but the two beds still fill up. 4 beds are even better. I get a lot of enquiries for 5 beds, but they tend to have lots of kids who can contribute to wear and tear.

Since your question is about a good ‘investment’, I would say location is critical. BHRP pays different rates for different locations. You can go to their website to figure out which areas qualify and how much they will pay by entering the property address. As you know, things change by block in Baltimore

Jennifer Donley · Answer

@Daniel Alfandre Hey there - I'm a Section 8 landlord in St. Louis, so I can't answer your Baltimore specific questions but I can answer a few others.

I would say that the answers largely depend on the area, purchase price, your goals, metrics, etc.  I would be somewhat surprised if 2 bedrooms are in larger demand than 3 bedrooms but I could be wrong.  In general, what I find is that demand for Section 8 housing, is extremely high, and supply, especially decent to nice Section 8 housing, is extremely low.

Here in St. Louis for instance, the ratios are typically better in the 3 bedroom space than the 2.  One of my rules for my rentals is that they have to cash flow between $200 and $250 per month after all expenses, PITI, reserves.  Our average 2 bedroom rent is around $800 so it's just difficult to get that much cash flow because there's not enough total cash to pull from!

I suppose 2 bedrooms are slightly less to renovate but here, I'm typically looking at 800 sq ft aprpox for a 2 bedroom and around 1,000 for a 3 bed.  So while paint and floors are a little more, it's not a lot more dollar-wise.  All the other systems cost the same so my reno costs don't vary a ton.

Hope this was helpful, reach out if I can help further.

Ozzy Sirimsi · Answer

I would worry about the bedroom,it will rent regardless.

It is more about the deal itself, I rent 2 bedrooms, 3 bedrooms, 4 bedrooms, they all have their own renter base.

It is more important, if you are buying a deal or not.

Joe Edwards · Answer

@Daniel Alfandre

Not sure about B-more but NJ section 8 pays more for 3 and more bedrooms and they are in much more demand.

Aaron Inman · Answer

@Daniel Alfandre 3 Bedrooms because they have the opportunity to be used as a rooming house as well dependent on the location of the property

Stephen Kehoe · Answer

All else being equal 3 bedrooms is definitely better than 2. The rent is calculated from the bedroom count. Also I wouldn't be too worried about which is more in demand. Baltimore has a lot of section 8 tenants. The level of renovation will matter more for demand.

Also when you do a get a section 8 tenant they stay longer on average so you can worry less about demand/vacancy.

i recently had a bust up with the Baltimore housing authority because they called a new 2,700 sq. Ft. 5 bed house of one of my customers a 3 bed. That meant it could only rent for the same as my 1,500 sq. Ft. House in a rougher part of town.

Daniel Alfandre · Answer

Great advice.  Thanks everyone for your responses.  I've been targeting 2 bedrooms but will start including 3-4 bedrooms in my search.

2 or 3 bedrooms for Section 8?

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