Seeking advice from experienced section 8 operators

[Philip Wagschal]

Hi everyone,

I've been interested in real estate investing for a long time, but I've never actually purchased an investment property.

I currently live in Brooklyn and have no interest in investing locally. My primary goal is cash flow, so I've been focusing my research on markets in the Midwest and South, particularly places like Ohio and Tennessee.

I have a close friend who is moving to Cleveland. He's smart, capable, and will be more familiar with the area, so I've considered either partnering with him or having him help manage properties locally.

I also have access to a home equity line of credit at  7%, which I'm considering using as a source of capital for my first investment. Because of that financing cost, I'm especially focused on finding opportunities with strong cash flow and solid margins.

Recently I've been researching Section 8 investing. From what I've learned so far, it appears to offer strong and relatively stable cash flow when properties are properly acquired, maintained, and underwritten. One aspect that actually appeals to me is the inspection process and clearly defined property standards. I'm very detail-oriented and enjoy building systems and processes, so that structure seems like a potential advantage rather than a drawback.

That said, I recognize that reading about a strategy and successfully executing it are two very different things.

For those of you who have successfully invested in Section 8 properties:

• What are the biggest mistakes new investors make?
• What risks are commonly overlooked?
• How accurate is the perception that Section 8 provides superior cash flow compared to traditional rentals?
• Are there particular neighborhoods or property types in Cleveland that work especially well (or poorly) for this strategy?
• If you were starting over today with a cash-flow-focused approach, would you still choose Section 8?

I appreciate any advice from experienced investors. Thanks in advance.

[Richard F.]

Here's the Standard you need to meet, although locally their could be additional.

Here is the HAP contract and other docs you will need in addition to your own Rental Agreement. You might review the HAP to see if you agree with the terms.

Here are the Fair Market Values per HUD per zip code.

And here is a sample "Adverse Action" Letter you are required to provide to all applicants denied. Of course, you first need to determine your screening criteria and application process, since the S8 vetting process is useless for selecting good Tenants. Every adult needs to be screened and sign onto Rental Agreement. I list kids too, by name and age. When they turn legal age, add their signature at the next renewal along with a screening.

Don't forget to have other necessary documents, such as House Rules with Fining/Enforcement procedures, Parking Rules, Pets/No Pets, Assistance Animal Policy, Late Fee Policy, and, if you get a Tenant that is required to pay a portion of the total rent, do not assume that is guaranteed. For that matter, the Govt portion is not truly guaranteed either. If you fail an interim inspection, or Tenant is complaining about issues that you are not addressing, payments may be stopped OR forfeited.

You or your rep should attend any S8 inspection, with copies of move in report and photos, to challenge inspector if they try to claim a repair will be Owner responsibility. You also need to ensure that you perform an annual inspection PRIOR to the S8 inspection, first to catch and repair any minor issues so they do not withhold rent, but also to determine if you actually want to keep the Tenants or Non-Renew them as allowed by local law. If you are not renewing, the notice needs to go out timely, with copy to S8 caseworker.

When preparing for an S8, actually any, Rental, select durable, low maintenance products and materials. Not just the cheapest you can find. Think long term. Prevention is always less costly than remediation.