2 or 3 bedrooms for Section 8?

[Daniel Alfandre]

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.

[Jennifer Donley]

@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.