I'm looking at potentially getting into Section 8 investments. interested in hearing from investors that hold these in their portfolio. How have these properties performed from a cash flow perspective? What issues have you run into with tenants or payments? Anything else you can share would be helpful.
First, Section 8 is not an investment. it is a housing program that provides assistance to people who otherwise can't afford market rents.
You will often hear that section 8 properties are "guaranteed money." But there are several catches to that:
- Section 8 doesn't always pay 100% of the rent. The tenant may be responsible for a portion. You still have to deal with late payments or non payments of the tenant portion.
- Section 8 inspections are generally more involved than just health and safety. They will find minor things and consider them violations, even if the tenant did the damage. They will abate (stop) your Section 8 payments until you correct the violations. You will not recover those rents.
- Section 8 tenants, from my experience, have a sense of entitlement, and will report you to housing and the buildings department whenever they feel slighted for any reason (late fee, you didn't change a light bulb). This will lead to additional inspections and potential violations and rent abatement.
- People who have no stake in something generally don't appreciate things. They don't understand the value of things, so for them to totally destroy your blinds, abuse your appliances, knock holes in walls, etc. is a regular day for them. They don't have to pay for it, so they don't care.
- They can leave your rental without giving notice because Section 8 will grant them a voucher for a new place for the next month regardless whether they gave notice or not.
I would think long and hard before embarking on this. I'd rather have an employed tenant who can afford the rent than someone who has lived life thinking rent is $300 a month and the government pays the rest.
There are a ton of past forum posts on this topic.
The plus is that you have another partner to get the tenant to comply, they have an incentive to not be kicked out of the program, and at least part of the rent is stable.
The negative is that you have to endure outsider inspections and you have a bigger chance to have a tenant who doesn't know how to care for a property.
You absolutely still need to do great tenant screening.
@Michele Fischer , not sure where you are from, but the CHA doesn't do anything about tenant compliance. They allow tenants to break leases, leave property damaged, and send them on their way to the next place.
Great insights Ray I appreciate it folks. Doesn't sound like I have a large enough portfolio to dabble in Sec8, I'll stick to traditional MF I think.
@Mark L. , I'm confused. You don't buy a section 8 building. You buy a building and people pay the rent with Section 8 vouchers. You can accept Section 8 with one SFR. It doesn't seem like you have an understanding of what Section 8 really is.
Actually, you approve the tenant first, and THEN you learn they have Section 8 if they do it right. The way people discriminate against Section 8 voucher holders is price the unit above market rates so even if a tenant qualifies for 100% Section 8, it's still not enough to cover the rent.
Be very careful
They would dsestroy your property
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing