Buying a Section 8 Property?

Question

Hello!

I’m looking at buying a current section 8 home in Tennessee. I was looking to see if folks had opinions on owning section 8 housing in general, or even better, in Tennessee (specifically Memphis)?

Would love to hear the pros and cons and what I should look for in determining if this is a good deal for me. The cash flow seems amazing, but I want to waste of any pitfalls that I’m missing.

Bruce Lynn · Answer

I would go to owner seminar if your local housing authority has one.

Remember they do a rent assessment on your home (at least in my market they do) so you only get what they think is fair market rent.

They also do inspection and yearly inspection and I think in many cases even if they say the repair is a tenant responsibility, you end up doing it as the tenant has no money, won't fix it and the housing authority won't pay you if it is not repaired....items such as holes in walls.

I have found that you may get more people living there than are on the lease and this is difficult to prove.....sometimes they say they're just visiting....if there are 2-3-4 more people living there it seems like the house gets lived in harder....just more people using stuff.

Rent can initially be delayed....so the housing authority will pay, but sometimes it takes them a month or two to get on the program....they will catch up, but if you need that cash flow it can be tough for a couple of months.

In my area there is way more demand for housing with people using vouchers than there are properties.

It can take longer than normal to get people in the property and start getting paid....they want to do too inspections often...one is rent ready inspection to make sure price is fair.  Second is the quality inspection to make sure property is in good shape....and there is some extra paperwork.

That's probably all the negative stuff I can think about....good stuff is once they get going, normally rent is not late.

I think the tenants tend to stay longer if they can...so that's a plus.

If you get tenants who understand the value they're getting, they can be super nice to you and your house.  They need to understand if they mess it up they could loose the voucher and get kicked out of the house.   Getting that voucher and a house is a big bonus to almost anyone, but not everyone figures that out.  In my area there is a long waiting list for vouchers.

Patti Robertson · Answer

@Benjamin Hoefling Be careful on the income guesstimate. The number on the HUD website isn’t necessarily what you will get. In my market it turns about $300 more than we can really get approved because we don’t have rent comps for similar properties that high.

Jeremy Taggart · Answer

@Benjamin Hoefling Generally there will be more wear and tear on the property. Can be a great steady payment but also want to check how much of the rent the tenant is responsible for. Often section 8 won't cover the entire rent so you need to make sure tenant can cover their portion. They typically just don't tend to take as good of care of the property as your normal tenant pool. There are yearly inspections which could be a pro or con as they are typically pretty picky.