Investing in Section 8 Housing After the COVID-19 Pandemic (VIDEO)
Many investors avoid section 8 apartments because tenants destroy the property. Section 8 has more pros than it has cons since you’ll be working with the government and the Federal Housing Assistance. This program started back in the ‘60s to help low-income families pay rent.
Most section 8 programs will have the tenants pay around 30% of their income towards rent. The program will allow a rent increase of 5-8% a year and you will have a large list of tenants to choose from that have already been verified. With section 8 apartments you can maximize your results while minimizing liability and inconvenience.
The professionals at the Local Records Office created a list of the benefits of section 8 and how you can make money using this government program.
What is Section 8 in Los Angeles?
Section 8 started back in the 1960’s right after the great depression when many families found themselves with nowhere to live so the government stepped in. In 1974 congress created section 8 programs to help families who are struggling to pay rent. The phrase “projects” that refers to a bad neighborhood or building comes from the program Project Section 8.
There Are Two Different Types of Section 8 Voucher Programs
Project-Based (building) – This program will have the tenant pay up to 30% of their income and the government will pay the landlord directly. If everyone in the apartment building is in section 8 programs the landlord will receive one check from the government for all the tenants and the remaining balance will have to be paid by the tenants. This is a good thing for the property owner since a check will be guaranteed every month.
Tenants-Based (individual) – This program will give the tenant a voucher directly to pay the rent every month. This voucher is can be used in any apartment building that accepts section 8 vouchers not just one like the project-based program.
With a tenant-based program, an inspector from the Federal Housing Assistance has to come to inspect the property before moving in. The housing program has more on hand with this program.
Section 8 Rental Advantages
- On-time payments
- Protection from tenant’s financial hardship
- Free access to tenants pool waiting list
- Higher rental rates (Fair Market Rate)
- Shorter vacancies
Section 8 Rental Disadvantages
- Government bureaucracy
- Delayed payments
- Strict inspections
- Delinquent payments (eviction?)
- No compensation for damages
Section 8 Investment Tips
Perks – Section 8 tenants are in the program because they can’t afford to make the regular monthly payments so adding additional perks to the unit will be a waste of money, the government will not give you more money if you have ceilings fans, metal screen doors, fancy cabinets, the latest refrigerator, or garbage disposals. Adding new perks will only cost you money in the end because of the repairs.
Quarterly visits – Performing quarterly inspections will save you money in the end. When performing the inspections you need to check for two things, #1 water leaks, a running toilet will cost you a lot of money every month. #2 see if the tenants are clean and taking care of the unit.
When Not to Rent to Section 8 Tenants
You don’t want to rent to section 8 tenants when the building is in a nice and upcoming neighborhood. Tenants in nicer areas are able to pay you a lot more when section 8 isn’t involved.