QUOTE OF THE WEEK
“Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn
By: Jennifer Donley, Contributing Writer
Everything bad you’ve heard about Section 8 rental properties is wrong. Well, most of it anyway.
If done right, I believe Section 8 rental properties are one of the most stable & profitable real estate investing niches out there. That’s especially true now that the pandemic has prompted local and national governments to ban evictions.
So, why is going Section 8 a good bet? There are 5 main reasons.
1. Guaranteed Rent. You’ll see this listed everywhere as a huge benefit of Section 8. In most States, 80% of Section 8 income comes directly from the government and gets deposited into your bank account on the first of the month. You don’t have to chase rent which is a HUGE plus.
2. Higher Rents*. In certain areas & instances, you can get more in rent than you would from a market tenant. This is dependent on a lot of factors, such as what asset class you’re investing in, how your local Section 8 office sets rents and what the Fair Market Rent is according to HUD for your local market. It can also depend on the landlord’s understanding and ability to maximize the Section 8 processes in their area.
3. Long Tenancies. Any seasoned landlord will tell you that you want good tenants who stay a long time because tenant turnover is the most expensive part of the landlord business. Good news here – Section 8 tenants tend to stay longer for a variety of reasons (especially if you have a quality unit for them – see below), improving cash flow through reduced turnover costs.
I’ve never heard anyone else talk about these last 2 reasons but I believe they’re what really make the Section 8 niche one of the best ways to achieve financial freedom through real estate.
4. Section 8 Rules. As in, there’s a lot of them. Rules the tenants have to follow and rules the landlord has to follow. Like any game, if you know the rules of Section 8, you can leverage them to your benefit. The Section 8 rules help me get annual rent increases, make sure all of my rent is paid, and ensure my properties are well taken care.
Note: These things don’t just happen. I have learned these rules and set up processes in my business to make sure I follow them every single time.
5. Supply & Demand. In my market, the number of people with Section 8 vouchers far exceeds the number of landlords with quality housing who take those vouchers.
To capitalize on this gap, we rehab our houses to be the nicest in the neighborhood, which attracts great tenants quickly. Great tenants mean minimal property management headaches and great cash flow.
Once I put all these together – that Section 8 rental properties can provide guaranteed income, reduced turnover, & wonderful tenants – I knew I’d found the niche for me. And now I wonder – who wouldn’t want that?
[Jennifer Donley, Contributing Writer, owns 26 rental properties and teaches others about Section 8 housing. Students can get access to over 75 plug-n-play documents that she currently uses in her business to buy & rehab houses, manage tenants and follow Section 8 processes, as well as weekly group coaching at http://www.section8educate.com.]