EP233: Section-8 Housing: An Investment Trap or Treasure Trove?

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Hi!!!

We’d like to clear something up. 

You see, we’ve heard the talk about section 8 housing among real estate investors, and we think you should know the truth! 👌

Section 8 real estate CAN actually be a great fit for your investment portfolio. 

These government-funded properties have somehow earned a bad rap by investors.

But you know what? 

Some of the things that are being spread around are myths, and not even close to being true! 

We wouldn’t want anyone to miss out because of fear-based rumors.

Especially since the right section 8 properties offer stable, consistent returns for savvy investors! 👏

Of course, knowing what to look for and expect is key. 

So, let’s take deep-dive into the surprisingly lucrative world of section 8 housing, shall we? 

Just remember to form your opinion from facts, not rumors. 

Because THAT is what will make you a next-level, successful investor. 😏

Bustin’ real estate myths is one of our favorite hobbies.

Here’s to making opinions and real estate decisions based on facts, not rumors. 🥂

In the world of real estate investment, Section 8 housing often stirs a potent mix of caution and curiosity among landlords. Is it a risky venture teetering on the brink of financial chaos, or is it the golden key to unlocking consistent, lucrative returns?

Today, we’re diving deep into the heart of Section 8 housing, challenging myths, and uncovering the truths that might just change the way you think about this government program. 

Whether you’re on the fence or looking to expand your portfolio, this exploration is for you.

Our journey into the realm of Section 8 housing began with a mix of skepticism and curiosity. Despite hearing horror stories, the potential for guaranteed rents and high demand in today’s economy was too enticing to ignore.

We were truly subtle into Section 8 housing unintentionally.  While acquiring our first multifamily apartment, a 76-unit gem in Phoenix, Arizona, unbeknownst to us, we inherented some Section-8 housing tenants.

We’d like to be clear from the get go, besides some clunky and burdensome paperwork and the extremely delayed rental payment from Phoenix Housing Authority.  

To be honest, there was no distinction for us between Section-8 vs Non-Section-8 tenants on any other fronts.  Just dealing with the bureacracy and red tape was a pain in the butt.

Now despite our misgivings about Section-8 through our studies we’ve discovered that there are some compelling reasons why Landlords or would-be Landlords may want to give Section-8 housing a second look.

To delve deeper into the intricacies of Section-8 housing, it’s imperative to start with a foundational understanding of what it encompasses.

Think of it as the government’s way of stepping in to help those who need it most – low-income families, the elderly, and the disabled – to get their hands on decent, safe places to live without breaking the bank.

The beauty of the Section-8 game? Choice. Whether it’s a cozy apartment, a spacious townhouse, or a standalone house, if it ticks the program’s boxes, it’s in play. This means people aren’t stuck in housing projects; they’ve got the freedom to choose a home that fits their life.

Now, landing a spot in the Section-8 lineup isn’t a free-for-all. The program is targeted at individuals and families whose income does not exceed 50% of the median income for the county or metropolitan area in which they choose to live. 

However, priority is often given to those whose incomes do not exceed 30% of the area median income, thereby focusing on the most economically vulnerable populations. Additionally, eligibility is determined based on family size, citizenship status, and eviction history, with a thorough assessment to ensure that assistance goes to those who need it most.

So, what’s the deal with properties that roll out the welcome mat for Section-8 tenants? 

Diversity is key. From families looking for a safe spot for their kids to play, to the elderly needing easy access to medical services, the right properties are those that tick off boxes for accessibility, convenience, and safety. 

Being near public transport, hospitals, schools, and shopping areas? 

Big pluses. And if you’re a landlord thinking about diving into Section-8, remember, your property’s got to be up to scratch with certain standards – think safety, cleanliness, and liveability.

For the smart investors and landlords eyeing the Section-8 market, it’s about more than just cashing in on guaranteed rent from Uncle Sam. 

Yes, that money’s good and steady, but you’re also signing up for a bit of homework – keeping your property inspection-ready and up to par. This isn’t just business; it’s about playing a crucial role in giving back, providing quality homes for those who need them most, and doing your part to uphold dignity and comfort in the community.

To jump into the Section-8 myth, let’s talk about a school yard tale that have been around for ages.

Have you ever heard that if you accidentally swallow a piece of gum that it will be stuck inside of you for 7 years?  According to Duke University gastroenterologist Nancy McGreal, MD, While it will stick readily to your shoe, gum does not stick to your stomach wall or intestinal tract. Instead of hanging around for years, gum simply travels the same path as food and is excreted in stool. 

Now that we cleared up the gum myth, let’s now pop the bubble on some myths about Section 8 housing head-on. There’s a big, noisy rumor mill that spins tales of Section 8 tenants being the main culprits behind property damage and chaos. 

This story has been told and retold, sticking to Section 8 like gum on a shoe. But let’s get real: the narrative doesn’t match up with the cold, hard facts. Section 8 tenants are as diverse as any crowd – many are downright respectful and take care of their rented homes like they own them.

Here’s the deal: Section 8 isn’t some wild west of housing. It’s built on a foundation of strict rules and checks that look out for both sides of the coin – the tenant and the landlord.

Take the Housing Choice Voucher Program; it’s not letting just any place pass muster. Every property has to go through a tough inspection to make the cut, proving it’s safe, healthy, and up to living standards. This isn’t just about ticking boxes; it sets the stage for how the property should be kept. And tenants? 

They know the score. Stick to the lease, keep the place tidy, or risk waving goodbye to the voucher that’s keeping a roof over their heads.

Now, think about it. If you were hanging by a thread onto a lifeline like housing assistance, wouldn’t you do everything in your power to keep it? That’s the reality for many Section 8 tenants. 

They’re not out to wreck the place; they’re more about keeping their sanctuary safe because the alternative doesn’t bear thinking about.

And let’s not forget, trouble tenants aren’t a Section 8 exclusive. Renting out property is always a gamble, no matter who your tenants are.

Landlords, you’re the linchpins here. 

How you manage your property can make or break the deal. Regular upkeep and actually talking to your tenants can prevent most of the drama before it even starts. Those landlords who get on the same page as their tenants, treating them with respect and fairness, often see their places kept in top-notch condition. 

Plus, let’s not overlook the golden nugget of Section 8: that sweet, sweet guarantee of rent money rolling in. It’s a safety net that can soften any worries about potential mishaps.

Venturing into Section 8 housing is a journey of weighing risks against rewards. With the right knowledge and approach, what may seem daunting can turn into a fulfilling and profitable endeavor.

So, we urge you – do your homework, talk to those in the know, and consider if Section 8 is the right path for your real estate ambitions.

Embarking on the Section 8 housing venture is not for the faint of heart, but for the savvy investor, it can be a journey marked by significant gains, both financially and personally. The initial perception of high risks – from dealing with compliance regulations to managing tenant relationships – can often overshadow the substantial rewards. 

However, with diligent research, a solid understanding of the program’s nuances, and a strategic approach to property management, these challenges can be navigated successfully, turning potential obstacles into opportunities for growth and profitability.

The key to unlocking the potential of Section 8 housing lies in education and preparation. Understanding the legal and regulatory framework of the Housing Choice Voucher Program is paramount. 

This knowledge not only helps in ensuring compliance but also in making informed decisions about property selection and tenant management. 

Engaging with experienced landlords, attending workshops, and consulting with legal experts can provide invaluable insights and equip you with the tools needed to thrive in this market.

Moreover, the benefits of investing in Section 8 housing extend beyond the financial. By providing quality housing options to low-income families, the elderly, and the disabled, landlords play a crucial role in supporting their communities. 

This social impact can be deeply rewarding, offering a sense of purpose and fulfillment that transcends mere profit. The guarantee of regular, government-backed rent payments adds a layer of financial stability and security to the investment, making it an attractive option for those looking to diversify their portfolio and contribute positively to society.

In the aftermath of a global pandemic that shut down the whole world and then, throw in the sluggish growth rates in rental markets across most cities, and you’re looking at a scenario where partnering up with Section-8 tenants might just be your financial lifesaver.

Think about it – when COVID-19 had the world in a chokehold, landlords with Section-8 contracts were sleeping easy at night. Why? Because the bulk of their rent was bankrolled by good ol’ Uncle Sam. And if there’s ever a cash flow crisis, well, the government has a nifty little trick up its sleeve – just crank up the money printing press. 

Fast forward to today, where rental hikes are moving at a snail’s pace, snagging approval for rent increases through Section-8 and other housing agencies is like finding an express lane in the slow-moving traffic of the rental market.

But, let’s not sugarcoat it; the real headaches don’t stem from the tenants themselves. The real challenges are (1) wrestling with the bureaucratic beast that is the housing authority, and (2) dealing with the type of properties that typically attract Section-8 interest. These properties are often older and come with their own set of surprises. 

In 2024, if you’re not in the loop, let me clue you in – those costs can spiral, fast, way beyond what you might have penciled in during your initial investment calculations.

Want a heads-up on whether you’re looking at a potential money pit?

Watch out for the hidden costs lurking in older properties – they can be sneakier and more expensive than you’d guess. 

If the building dates back to the early ’90s or before, features a chiller or boiler system, boasts a flat roof, or relies on cast iron pipes, brace yourself. These are red flags signaling you might be diving into a financial deep end.

Here’s a golden nugget of wisdom: take your initial plumbing repair estimate for these vintage properties and triple it. Yes, you heard that right – triple. You’ll be patting yourself on the back for this foresight later on.

Now that you learn about Section 8 Housing, go watch this episode where we Bought This Land to Turn It Into Millions of Dollars.