A Section 8 rental is a housing option for low-income individuals and families. Recipients are given a Section 8 housing voucher to cover a portion of the rent. The Section 8 tenants' rent contributions are based on their income. They pay 30% of their adjusted monthly gross income to the landlord. The voucher covers the rest up to the payment standard set by the local PHA.
Section 8 houses are owned by private landlords who agree to accept Section 8 vouchers. There are approximately 2.1 million Section 8 landlords across the United States since 2021. They are regularly inspected to ensure they meet safety and health standards set by the housing authority. These inspections cover a wide range of criteria. This includes structural integrity, sanitation, heating, and plumbing. Property owners should pass the inspection to stay in the program.
Investor Tim Leak says 2024 is a good time to invest in Section 8 properties. According to him, Section 8 vouchers continue to increase. However, there's a shortage of landlords. Rental on Section 8 properties is also higher than the market value. It's an unsaturated market with huge potential for real estate investors.
This article covers all you need to know about Section 8 rental investing. It discusses the roles and responsibilities of landlords and tenants. The qualifications of becoming a landlord are tackled and the pros and cons are explained. I'll also share first-hand experiences from real landlords and section 8 tenants, and their opinions on the Section 8 rental business.
What is Section 8?
Section 8 is the U.S. government’s housing assistance program for low-income families. The Section 8 recipient gets a voucher that pays a portion of their rent directly to the landlord. Over 2.2 million low-income households in the United States benefit from this program. It aims to provide safe and decent housing for those who struggle to afford it. Studies show that Section 8 voucher recipients are less likely to experience homelessness.
Eligibility to the program is based on factors like income, family size, and citizenship status. In general, the Section 8 recipient should have an income below the median in his/her area. Specifically, the income must be below 50% of the median.
A Section 8 landlord offers rental properties to tenants who receive government assistance through the Housing Choice Voucher Program. These landlords must complete an application process and get approved by their local Public Housing Agency (PHA). The PHA inspects the Section 8 home to ensure it meets the Housing Quality Standards.
The landlord agrees to accept partial or full rent payments from the government. Section 8 landlords work with local housing authorities to ensure compliance with the Section 8 program requirements. This includes undergoing regular property inspections and maintaining the property to meet health and safety standards. In return, landlords benefit from a reliable source of rental income and a reduced risk of tenant default.
What is the Public Housing Agency’s Definition of a “Family”?
PHA defines "family" for Section 8 eligibility as single persons living alone or households with one or more children. It also includes elderly families where the head, spouse, or sole member is 62 years or older. Families where the head, spouse, or sole member is a person with a disability also fall into this category. Displaced families affected by government action or natural disasters are also eligible for Section 8 vouchers.
How Much Do Section 8 Landlords Make?
Section 8 landlords make between $1,080 and $1,320 per month for a two-bedroom unit in semi-urban areas. The HUD covers 70% of the rent. In urban areas like San Francisco and New York, monthly rents range from $2,000 to $3,000. Landlords here make from $24,000 to $36,000 annually. HUD reward landlords by offering higher rental rates. It's typically 90% to 110% of the fair market value. Landlords in certain areas even charge up to 120% of the FMR.
9-Step Guide on How To Become a Section 8 Landlord
Can a Landlord Refuse a Section 8 Tenant?
While some states mandate acceptance of Section 8 tenants, landlords are not required to accept every applicant. Landlords can use the same qualifying standards and background checks for Section 8 tenants as they do for non-Section 8 tenants.
What if a Section 8 Tenant Destroys the Property?
If a Section 8 tenant destroys your property, the situation should be handled according to the terms of the lease and local laws. The tenant is responsible for any damage beyond normal wear and tear. Landlords can push for legal actions as they would with non-Section 8 tenants. They can deduct repair costs from the security deposit or take the tenant to small claims court. The landlord can also report the incident to the local public housing agency. It's a ground for terminating the voucher assistance of the tenant.
Coaches That Teach Section 8 Investing
Eric Spofford is the founder and CEO of Spofford Enterprises. He coaches Cash Flow King, a Section 8 investing program. The training shares investing strategies in single-family homes in landlord-friendly states. It focuses on homes valued between $50,000 and $70,000. These properties yield $1,300 to $1,500 rental rates in high-profit areas.
Tom Cruz is a Section 8 investing coach and realtor from Wilmington, North Carolina. He started investing in real estate in 2012 through condo rentals and wholesaling. In 2014, he focused on Section 8 long-term rentals. Tom now owns 500 properties, mainly Section 8 single-family homes in North Carolina. He also has some properties in Ohio, Tennessee, and South Carolina.
Antoine Martel Explains the Pros and Cons of Section 8 For Landlords
Pros of Section 8 for Landlords
Consistent and guaranteed rent payments
High tenant demand means low vacancy rates
Long-term stay, lower turnover rates
Section 8 homes are 20%-30% above the market rate
Cons of Section 8 for Landlords
Annual property inspection by HUD
Strict regulations and rent caps based on fair market rent
Security deposit is limited to 1 month’s rent
First rent payment can be delayed until after the tenant moves in
Who is Antoine Martel?
Antoine Martel is a Canadian entrepreneur who moved to San Francisco in 2010. Five years later, he moved to Los Angeles to study entrepreneurship at Loyola Marymount University. Antoine already showed business potential at a young age. He sold plums, candy, and soda. In highschool, he ventured in e-commerce through his store TRACKL3T.
Antoine ventured into real estate after attending a seminar. He bought 10 single-family homes in 2010 with his father's money. This venture led to the creation of Martel Turnkey. His company now flips 20 properties per month. He also launched two real-estate courses: MartelInvest and FlipSystem.
Section 8 Landlord's Experience with Tenant
Tim Leak's Section 8 tenant lived on his property for over a year. He left after getting a better job and a new house. Despite common stereotypes about Section 8 tenants damaging properties, Tim finds the home in good condition.
There were only very minor issues, like uncut grass and a few junks left behind. Overall, he got a good tenant who took care of the property. He emphasizes the importance of thorough tenant screening and consistent property maintenance. He suggests using the same paint across all properties so they’re easier to touch up later on. After repainting and changing the carpet, it was now ready for its new tenant.
What’s The Difference Between Section 8 And HUD?
HUD (established in 1965) is a federal agency that oversees national housing policies and programs to address America's housing needs. Section 8 is a program under the HUD. HUD is the overarching entity responsible for housing initiatives. Section 8 is a targeted program offering direct rental support through vouchers. Under Section 8, tenants only pay 30% of the total rent cost. 70% is covered by the voucher, essentially, the government.
Risks of the Section 8 Rental Business
Digital Real Estate: My Low-Risk Alternative To Section 8 Investing
Digital real estate is my low-risk alternative to Section 8 investing. This business builds simple websites for local businesses and ranks them on Google. Local lead gen has higher profit margins compared to Section 8 investing. Income is also more stable and consistent.
In local lead gen, you don't have to deal with tenants. You generate leads for businesses and earn passively from them. Unlike Section 8 investing, you don't have to go through a rigorous application process. You are the boss and control every aspect of the biz.
Section 8 landlords need to pass property inspection every year. They have to repair property damages to continue renting their unit. They also have to deal with tenant eviction, which could be tough. Digital landlords never have to worry about any of these. Ranked sites auto-generate leads which you can sell at 85% margins.
