Is Section 8 a sustainable business during a pandemic??

Question

In light of the pandemic, what are your thoughts on the sustainability of the Section 8 Business on the south side? I have realized it is quite difficult to get in contact with the CHA or HACC at this time. Any advice on how to get in contact with them?

Jomar Edwin Benoit · Answer

Thanks so much for this advice guys. It was amazingly helpful!

Matthew Irish-Jones · Answer

@Jomar Edwin Benoit we specifically cater to section 8 tenants in C class areas. We have the case workers on speed dial for all of our vacant units. Every section 8 payment has come through during the pandemic without fail. Our entire C class portfolio and management strategy is based around section 8 in high risk areas. The extra work to make contacts, do the paperwork, be present for inspections, and get the tenant placed and the rent coming in has paid off big time during this pandemic.

Edward Liu · Answer

Although sec 8 offers rent stability, there are many downsides to sec 8 also. Please do your research carefully.

- My worst investment is a 12 unit building full of sec 8 when I brought it. There were so much damage to the building as each unit moves out, water pipe in the basement was cut and stolen, so bad that I kicked everyone out and did remodel (convert to smaller units) and tailor the building now to higher end clients.

- One of my better investment is 35 unit with mostly sec 8 tenants, where I sold and tripled my cash in about 2 years.

- Funny things is above 2 buildings were within 10 min walking distance and managed by the same property manager.

My suggestion is avoid sec 8 tenants with lots of kids (especially teens). When bunch of them in the same building, bad things occur. For SFHs, I also have few sec 8 tenants. Those are mostly trouble free.

John Warren · Answer

@Jomar Edwin Benoit managing section 8 is not passive and it is not hands off. There are definitely good folks that have section 8 vouchers, but the vast majority land lords would probably prefer to rent to A and B class renters than deal with section 8. I have some section 8 in a C- class apartment building that is professionally managed, and I can tell you that it meets a need in lower income areas where you can't get good quality tenants. It is a LOT more work though, and the bureaucracy is mind numbing.

I currently have collected 100% of the rents in my buildings in the Berwyn and Lyons area, and have not really had any disruptions at all. The hysteria about tenants not paying rent is starting to pass, and as I have spoken to friends, colleagues and clients who own buildings, almost all of them have had no significant issues collecting rent.

Robert Smith · Answer

Jomar,

In my opinion, Section 8 is probably the safest place to be right now if you are a buy and hold investor. There are a lot of investors out there with market renters who are probably wishing they were in Section 8 instead right now. If you have tenants that have 100% vouchers, it is likely that this pandemic had had no effect on your cash flow as this money comes direct from the government.

However, I can attest that the communication difficulties that you are having with HACC are not uncommon right now. For whatever reason, their capacity for processing moving papers has been greatly diminished. In April, I purchased and rehabbed a SFH in Country Club Hills (very light rehab). My property manager found a tenant in less than a week and she wanted to move on May 1. However, HACC has been extremely slow to process her moving papers. It now sounds like July 1 will (maybe) be the actual move in date.

Full disclosure here. I'm a newbie with 1 (currently empty) rental. But to answer your question, I think Section 8 is a great place to be right now for the stability in cash flow. However, if you are actively trying to fill units, you should be prepared for delays because HACC (and I assume CHA) are not operating at full capacity.

Ryan Fox · Answer

@Jomar Edwin Benoit- I've had no interruption in rents paid since the pandemic. A quality property manager should be able to work out any communication difficulties.

Is Section 8 a sustainable business during a pandemic??

Is Section 8 a sustainable business during a pandemic??

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