Rental Properties as Section 8 KCMO

10 Replies

Hello all! I have been wondering about Section 8 rentals in KCMO areas. What are your thoughts and do you have any personal anecdotes you can share? I am curious about the niche and would like to know more about others' experience! Any thoughts would be great!

@Koki Agata So I have one rental in KCMO and its a section 8.  I honestly had no intention at all of going section 8 but I went through a turnkey company about 2 years ago and, surprise, they tenanted it with a section 8 tenant.  So far its been really positive but I'll do my best to list the pros and cons and please reach out or PM for any other info.  I've got a few things that I can't really share on here either ha... so PM me if you want the real goods :) 

Pros: 

- Above market rent generally 

- This is also a con but there are yearly inspections.  They can nickel and dime you but if you're investing in lower priced rentals in general its nice to have someone HAVE to go through your rental once a year and make sure its ok. Some people look at this as a pain for them when they have to make repairs BUT I think it also reminds the tenant that if they want to stay in the program they can't be growing weed or running a pit bull breeding operation indoors because they will get caught as well. 

- The rent really does come in every month on time like clockwork. 

- If you do this with a larger bedroom count home (like 4-5 bedrooms) you can make some good money.  There are some people who only like to invest in 3 bedroom homes because 4-5 are harder to rent generally.  But, if you're a parent and have 3 kids you want a 4 bed home and they are hard to find.  So, when you find one you stay there and the 4 bed voucher amount is def. above market.  When this tenant moved in I (maybe stupidly) personally reached out to say hi and they were really grateful to move into a nice home in a decent area and were basically like "we plan on staying here forever, thanks". We all know that nothing kills your return like turnover and I feel like its really easy to end up with a 20 year tenant via section 8.  They are on their 3rd year with me and so far so good. 

- I know that some people don't like renting to families because kids will kill a place, which they will, but if the tenant stays forever what does it really matter? 

-I don't know if you've been following KCMO local politics but they are about to pass a tenant bill of rights that makes it so you have to accept section 8 tenants anyways so you might as well figure this all out anyways because I don't think that you'll be able to avoid this for long no matter what you're trying to rent. 

CONS

- Right after I started renting to section 8 they passed an annual inspection.  Its honestly a pain.  They found a ton of small things wrong and even after I fixed them a different inspector would come out to check the repairs and then find additional things wrong.  Of course being long distance I also had to pay my PM to accompany each of their inspections and then follow up with them. If you're local you can just go to it yourself but if you're out of town on top of having to fix some things you have this annoying extra PM fee.  Plus most PM's mark up any repair so it becomes frustrating fast. 

- The government shut down last year was a real scare for me because HUD shut down and they were talking about section 8 payments being delayed. Now, not every president is going to shut down the government for that long but it was scary (to me at least) while it was going on. If your entire portfolio was section 8 I could see how you could really be screwed if something major went down with the government.

- So the rental rate starts above market but good luck getting an increase passed or even figuring out the process for that. There are charts somewhere for what you're suppose to be able to make in KCMO with section 8 but it doesn't seem like they actually pay attention to HUD's own rates.

- There is a limited PM pool of people willing to manage section 8. 

I am currently investigating something I learned though where apparently section 8 in KCMO will pay way more if you include utilities in the rent.  I'm going to try and go solar, make the rental super energy efficient and see if I can pocket the difference and try to make super green section 8 housing.  This is my long term goal with it, we'll see how it goes.  I hope this helps and again, please message me with any additional questions. Also, keep in mind I only have one rental so I'm sure that someone else will have much more info.  Thanks! 


@Adam Sankowski Thanks for the insight. Have you ever added a bedroom? A GC buddy of mine quoted me $10k which he said included egress and putting up wall and the works in a basement. I can see how newer basements are conducive to rooms, but some of the older basements in KC worry me.

@Koki Agata I'm also interested in section 8 after hearing a recent BP podcast. But, one thing that I feel was easy to overlook in the podcast, was that the investor bought near gentrifying areas for appreciation purposes and attracting tenants looking for improving neighborhoods and schools.

@Adam Sankowski hit the nail on the head. I have experienced much the same for Section 8 in Kansas City. I have 2 Section 8 houses and the tenants have both been there going on 3 years. The Property Management company that I use still collects at least one months rent for a security deposit (not paid by Section8), which I feel keeps skin in the game for the applicant. Adam also brings up a great point... it is important we as investors stay in tune and in touch with the tenant/landlord laws in whichever state we invest.

@Adam Sankowski My apologies for the late response to your post, but Thanks so much for your insights! It gives me a good big pictures of what it is like, and perhaps I can be flexible and diversify in the future using Section 8. It seems like a good program to me, though there is a mandatory inspection every year, I see it as preventing bigger expenses that occurs when some small things go unnoticed or unfixed. It is more appealing to me now after your insights, and I will definitely look into it as a future opportunity :) I would probably also message you sooner or later with more questions, but THANKS a lot for now! This was super helpful!

Cheers

@Josh Coup Haha, I know what episode you are talking about. That was also what inspired me and made me think about this particular direction to diversify.

All in all, I think every one deserves a good home, and being able to give back to the community by providing better housing to those with potentially less opportunities was just a home run for me. If it helps gentrify the neighborhoods, that is icing on the cake.

Cheers

Section 8 in KC is really slow and hard to work with, to be honest. Independence and Lee's Summit are much better. That being said, we might not have a choice shortly after the KC Tenant Bill of Rights gets voted on.

@Koki Agata I have not personally had any issues with the tenants.  They have both been there over 2 years.  The annual inspections are an added cost but to me that is better than paying for a turnover. My property management handles everything for me for the inspections and fixes if necessary. I have mentioned before its important to pay attention to the Tenant rights and other things being discussed within the city

@Josh Coup Hey sorry I saw this tag before but never responded my bad.  So the house came to me turnkey so I don't have any experience with adding basements.  I know that I was excited that I could maybe add a basement bedroom for a rental I have in Indy - just so I could get a better appraisal- So I went ahead and spent the money to add flooring to the basement (which was still a good idea) but then when I tried to call it a basement it didn't pass and then to do an egress window wasn't almost worth the effort... 10K to start sounds about right but that just gets you the egress window in, you need a closet... for it to be dry all the time... I just don't know if its worth it, not on a lower priced rental at least.  I would just try to look for a four bedroom house.  I feel like basements there are often wet or have issues and when your talking about a 80-100K house just find the four bed or five bed ones from the start.  If your price point is higher than it might be worth it?  Also mid-west basements always worry me moisture wise... 

@Chad Stark Thanks for your insights! Yeah to me the added cost of yearly inspection is better off than having higher turn over rates. Honestly I think it works for us to do due diligence to keep the properties healthy anyway. Also, yes, I have been following the new bill of rights for now, but as I am currently out of the country, I am unavailable to attend city meetings, but my wife has been going on behalf of me.

Anyhow, thanks a lot for your advice, and hope to cross paths in KC sometimes.

Cheers

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