I personally like Section 8 Housing. Section 8 is a department in the Housing and Urban Development (HUD) that provides housing to low-income individuals through rental assistance.
This is how it works: A potential tenant receives a housing voucher, usually based on an approval for the number of bedrooms. The particular housing voucher is good for about 60 days and that tenant has to go out into the open rental market and find a property. As a landlord or a property owner, the first thing you ask to see is that voucher as it tells you how many bedrooms that person is approved for–and thereby how much rent is going to be paid by the housing authority.
Here’s the nugget about Section 8 Housing: the administration of the housing vouchers is all local. It’s funded by the federal government, but the administration of funds and vouchers is local. So if you’ve had a bad experience with Section 8, then I suggest trying a different location. I personally had a horrible experience in a county in Texas because of the director of the housing authority. But HUD actually got rid of him. Since then their program has made a 180 degree turn-around.
So look for an aggressive housing authority–then you have a chance to find a premium in rents. You do have to manage a little more tightly, but I own properties and it’s worked successfully for me (with particular housing authorities).
- Government pays the rent–The government pays most-to-all of the rent. But in many cases the tenant has to pay up to 30% of their income (just be aware). The nice thing is that the housing authority actually mails you (or your management company) the rent at the first working day of every month. And whatever the tenant has to cover is usually very small and manageable. (Like say $100 monthly rent).
- Steady stream of tenants–You don’t have to sell it when you’re renting property because there is built-in demand. Through the Section 8 program, potential tenants are actually pointed towards your property.
- Section 8 tenants are longer term than normal tenants–I have some tenants who have been in my properties for 5-10 years! Those long term tenants do a better job of taking care of the property, lowering your repair costs. And you have no vacancy. Definitely an advantage.
- Less competition with other investors–A lot of investors are scared of Section 8 Housing! Either because they’ve had a bad experience or have heard of bad experiences from other investors. But I chuckle at this because of what I told you before: administration is all local. Investigate the housing authority before you make your move.
- Reimbursement for damages caused by tenant–This can happen since the housing authority itself is actually funding the particular cost of what those damages were. This won’t always happen, and it might not be 100%, but it is certainly an advantage.
So what do you think? Are you going to take a look at Section 8 Housing?
Do you have an experience with Section 8 Housing to share? Let me know in the comment section below!
I will return with a blog next Sunday!