Happy Friday !! Section 8 Investing???

Question

Good Morning BP,

How do you guys feel about section 8 investing? Do you think it can be a huge risk vs just having a regular rental investment property?  i think you can run into alot of disadvantages to be honest.  I believe that it lacks accountability in the tenant and they'll tend not to take care of the property because they aren't taking paying for it.

James Mc Ree · Answer

You are confusing 2 questions:

- How do you feel about lower income real estate investing?

- How do you feel about Section 8 tenants?

I draw this distinction because many of the issues you will encounter with Section 8 tenants are common across lower income real estate investing in general. For example, get used to your tenant living paycheck to paycheck and coming up short every now and then. Likewise, any tenant might cause damage, but lower income tenants might not have funds available to repair it regardless of responsibility. Screening your tenants is paramount regardless of income. There are lots of lower income good tenants out there - and some bad ones too!

I think Section 8, considered separate from the tenants, is great. You can have a little bit of hassle getting started with an extra inspection, lease and getting qualified, but it should be smooth sailing once you are started. My Section 8 rents come in like calendar-work. They do 1 inspection a year in addition to your local inspection if you have one. They will call out issues and hold up your rent payments until you address them, but that's usually just being a good landlord anyway.

One of the nice features of Section 8 is tenant who break the rules can lose their vouchers. There is a years-long waiting list for a voucher. A low income traditional tenant might move out owing you money for damages and you often can't do much about it because you can't productively sue someone who is broke. However, the Section 8 tenant will lose their voucher and is much more motivated to raise some funds from friends and family versus being homeless.

My recommendation is to pursue the investment property strategy you are interested in and don't worry about the source of income your tenants will have. You aren't doing Section 8 investing. You are doing real estate investing.