BRRRR Strategy Coupled with Section 8 Tenants

7 Replies

Hello All,

My investment partner and I are thinking of different avenues on how to buy and hold homes in low income areas. I've seen people doing this across the country with no understanding on what incentives they are giving for others to move into neighborhoods which unfortunately may have high crime rates with unreliable and or problematic tenants/neighbors. So we started thinking of ways we could entice residents of the neighborhood to rent rehabbed homes without the fear of not being able to afford rent and the property generates guaranteed rent role without high tenant turnover or encountering high vacancy rates. So the only solution we thought about (not sure if this is a novel idea but I haven't heard too many doing it) is to rehab duplexes and triplexes and then supply the apartment to Section 8 tenants.

So the questions I have are:

1) Is this a viable solution that anyone has done before/has information on?

2) Are there certain criteria a property owner needs to meet in order to supply homes to Section 8 tenants?

3) Is there any local or state registration you need to complete in order to supply housing to these tenants?

4) Is there a minimum and or maximum amount of units you can own/provide for Section 8 housing?

5) Are there any gov't assistance programs encouraging investors to supply Section 8 housing?

I'm sure I'll have many more questions depending on the type of information I get lol. Look forward to hearing your responses!

Thanks

I am certain there will be many that will have answers to your questions but for me the question is why would you want to waste money rehabbing for section 8. They are only likely to destroy the work you do. There social standards and social skills do not warrant "nice".

This has been tried and failed many times with investors walking away wondering how tenants can be so irresponsible and so destructive.

Section 8 ….you bring the property up to minimum required standards.

@Jibreel Hameed

I believe you may be able to make this a profitable venture without rehabbing.  By the time you buy something inexpensive and then rehab it and then put Section 8 tenants in it, you will have probably spent the same,....if not more money than if you would have simply did what i did, which is............

Find a property that is listed for sale that already has Section 8 tenants in it and then buy it. 

It is simple to do man....go onto zillow and type in any marketplace in the U.S.   Columbus, Memphis, etc....duplexes for sale.......then in the keyword search on Zillow type in the word Section 8. You will see the properties listed with Section 8 tenants and about 3/4 of the time it also says what they are paying.   Make sure that it at a bare minimum meets the 1% rule....although often you will see it is higher than this.  I do not share the same sentiment as "Thomas" on this thread in that it sounds like he has had a very negative experience with Section 8 tenants or he knows someone that has.  Almost half of my portfolio has Section 8 tenants in it and as non section 8 people move out i try to move in more Section 8 tenants but i make sure my property manager screens them THOROUGHLY....not with just what's on paper regarding credit report, income and past criminal activity (If any).....I make sure my PM screens to make sure they have no pets, no evictions, no smoking OF ANY KIND and no felonies and we still get TONS of people calling...the biggest problem becomes picking someone from who is left.   This is from someone who has Section 8 tenants in Oakland, CA, Concord, CA and Cleveland, OH.

Keep it simple Jibreel.......but FIRST get preapproved with a lender....there are plenty of them here on BP.   

@Jibreel Hameed There are no requirements to provide Section 8 housing. 

Actually, I have switched the properties I managed to no longer provide section 8 housing for a number of reasons

1) Providing higher rent income 2) Not having to deal with HUD 3 )Less maintenance to deal with.

It all depends on the property and location. 

@Brian Garlington That’s very good advice Brian, I appreciate your input. I was coming into this strategy thinking of ways to try and increase property value but I’m guessing that shouldn’t be a focal point going the Section 8 route. Regardless of the value I may want to put in, the house would only sell based on the comps and surrounding area, correct? AdditIonally, I already assumed we’d have to have a very thorough tenant screening process but I dIdnt want It to be to the point where we couldnt get anyone under lease.
@Kevin Dang Thanks for your response Kevin. Increasing rent is one of the main issues we were thinking about. I don’t know if there are any stipulations on how high we can go and how much the gov’t would cover. I also thought about maintenance issues as well. How often did you encounter issues with these properties? Looking back, is there anything more you could have done to prevent/decrease issues?
@Jibreel Hameed Less maintainence but property isn’t cared for. So at the end, more renovations needed to be done. A tenant that is paying more expects to receive the housing condition as they have signed up for. Informed tenants will fight for deduction in rent if there is a problem. They will call a lot but will keep things clean and let you know wasap. If you’re going to sell the property one day, you’ll want a high income rate to increase the value of the property. For me, don’t want to deal w a 3rd party in my business also.