Let’s Talk about the pros and cons of investing in Section 8. One of the great things about Section 8 is that it is stable in the sense that your rent it’s always going to come in right on time, with the caveat that you’re already in the system. When you are new, in the case that you have just submitted your tenant’s information, your complete Section 8 package to get paid and it could take between 30 to 60 days to first receive your rent.
This happens just on the first paycheck. Unless you have some funds in your bank account or some capital that’s coming from any of your other rentals to cover this new one, you’re going to have to wait 30 days to 60 days for your rent to come in. Once it comes in it’s great because it’s coming in every month as scheduled. All you have to do is just to collect the remaining portion of the rent.
As with every investment, there are risks, but the key is to be able to recognize the number of pros and cons to realize if it’s worth it to keep that investment.
Pros of Investing in Section 8
An important pro about Section 8 is that they are in high demand. According to The New York Times, there is a high demand for affordable housing especially in urban areas. A good way to supply affordable housing is through the Section 8 program.
In Section 8, you charge whatever the market determines. If the proper rent is $2,000 then you charge $2,000 if it’s $1,400 then you charge $1,400. For some families, for example, $2,000 it’s a little bit much for them. They would like to move their family into nice neighborhoods so that their kids can have access to great school systems but maybe they cannot afford the $2,000 and that’s when you step in.
You’re going to provide housing for the high demand because there’s not enough supply to make it affordable for all those families. You’re going to step in as a real estate investor or as a landlord and you’re going to put your house, your property as part of the Section 8 program. Then, you’re going to be a savior, you’re going to provide housing for an area that is in high demand, not enough supply, that means you don’t have much of a competition because there is a lot of need for that and you can actually tap into the funding and basically receive funding that way in a stable way.
The Tenants have to maintain your property in a good condition
The next pro is the fact that the tenants have an incentive to maintain your property in a good condition. Why? Because if they don’t maintain, they don’t keep up with the property, they don’t make sure it’s nicely taken care of and they can lose the assistance that they receive from Section 8 which eventually, will translate to them not having the ability to afford to live in a type of place like that. This could eventually lead into an eviction, and nobody wants to go through an eviction, nobody wants to put their family on the street.
This is just something that it’s not worth it and all they have to do is just to keep up with the maintenance of the property and it’s a great incentive. You, as a landlord, will expect anybody, not just Section 8 tenants, but anybody in your rentals to take good care of your property.
Sometimes, landlords complain that if the tenant destroys your property you don’t get compensated for the damages.
The same happens if you were to rent your property to a family that’s not part of Section 8 and they ended up destroying your property because you will still not get compensated by anybody. It’s a loss that you have to incur and the city or the government is not going to take care of it. What difference does it make just because they are a Section 8 tenant? It’s all part of the vetting process. This could be counted as one of the cons.
You have to make sure that you vet them thoroughly and properly, that you do the proper background check. You have to check the references to make sure that they are a good potential tenant and they are worthy of your rental. Remember that anybody could destroy your property, not just Section 8 tenants.
The next pro that you get out of it is that you get pre-screened applicants. In a way that complements your background check because those pre-screened tenants were already vetted by the PHA, they already checked that their income it’s in fact what they claim to be, they already checked some of the references and they might have even checked their criminal records.
You’re exempt from doing the proper due diligence or the proper background check on them but rest assured now that you have an extra layer of reviews of pre-screening, of vetting that was done on the tenant and all you got to do on top of that it’s your own screening as well. Another benefit that you get out of this is that you’re going to have increased visibility.
Why? Well as part of the Section 8 program you’re going to get to market your property on their website and their repositories and their listing. That way, it’s going to help you increase your pool of applicants so that you have more choices to choose from. Again, beware of any anti-discriminatory laws. You have to abide by them, you have to be respectful of people and respect their religion and respect their race, otherwise you could get fine because you’re just simply not compliant with the law.
Investing in Section 8: There are only few cons
One of the disadvantages about investing in Section 8 rentals is that sometimes you can get unannounced visits from the city for property inspection. Depending on the timing you might get caught in a bad situation.
For example, if something breaks and the tenant never told you or maybe something breaks and you’re in the process of fixing it but it’s not ready yet because maybe you’re waiting for a part or something like that and all of a sudden the inspector just happens to appear in your Section 8 rental and you could get a fine with it. Unfortunately, that’s one of the costs of doing business in Section 8.
Only two of the items might not work and then you have a whole listing of benefits. The key is to get yourself educated so you can make an informed decision and not let yourself be guided by misconceptions, by rumors that you heard on the street.
It’s all depending on the due diligence that you do on the tenants and not necessarily something that it’s a proven fact.
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