Section 8 in low-crime areas

[Robert M.]

I'm interested in hearing from anyone who has experience with investing in section 8 properties that are located in low-crime areas.  I've read enough to know that I want to stay away from the $50K properties in urban areas, but I wonder about those that are located in the outlying areas of cities in the Southeast - where "country" folks often live.  For example, I'm considering a couple of properties in some of the rural parts of Rossville, GA and Fort. Oglethorpe, GA.  The former area isn't one where I'd want to live, the latter I'd consider for my own family, and both are within 15-20 minutes of Chattanooga, TN.  It seems that it could be possible to attract a higher quality tenant than in downtown Atlanta, downtown Chattanooga, etc. and, therefore, might be worthwhile to consider section 8 in areas like these.  However, I have zero experience with section 8, and am new to rental investing (though I've flipped in higher-market areas), and I want to tread carefully.  Thoughts or advice?

[Brian Levredge]

As someone who owns/manages properties in those areas you mentioned it often boils down to several things.  First the program is only as good as the Housing Authority that manages it.  In Chattanooga, that means not so hot.  While it's true Section 8 residents (it's harder and harder to find landlords willing to accept the vouchers) often stay longer than non Section 8 you have to understand the lease is between the resident and  landlord, and the Housing Authority can change the terms (cancel) with 30 days written notice.  That leaves you holding the bag.  

While we don't deal with the Housing Authority programs in N Georgia the other thing you have to look at is the market rent.  There are some zips in Chatt where the market rent for Section 8 is about $100 less per month than what you could get on the open market.  Conversely, there are some zips where the rent is also way higher.  It boils down the number of vouchers located within a certain zip code that in part determines this.