According to the Federal Reserve, a staggering number of low-income families in the USA spend 56% of their income on home rents! To relieve their burden, the public housing authorities launched a federal program called Section 8 that helps them with their home rents and utility bills. Section 8 is an excellent step in the right direction for tenants, but many investors are also opting to sign up as Section 8 landlords.
It can be an excellent investment as it ensures strong cash flow every month, pre-screened tenants, and low rental turnovers. But is it the right decision for you? Let’s look at some advantages and disadvantages of Section 8 investment.
The Advantages Of Investing in Section 8 Properties
Section 8 housing advantages for low-income families cannot be understated. This was a much-needed step for people having low incomes and needed to pay off home rents. But with it came certain benefits for landlords as well. Here are the advantages that you can reap as a Section 8 landlord.
A stable income of rent is always a primary concern for landlords, especially during the COVID-19 era. There are many reasons your tenants may fail to pay the rent. Some are genuine, like job loss or personal struggles, but some are not so much. In that regard, Section 8 housing is quite fair. Not only are the tenants pre-screened by the government, but the government also covers up to 70% of the house rent and utility bills of the month. You can be rest assured that the housing rent will keep coming every month with Section 8 housing.
Lower Eviction Rates
Families that rent Section 8 homes tend to stay at the same place for a long time. Section 8 housing is affordable for them and given their financial situation, it is the better option for them to stay under a genuine tenant with government aid than to find a new place to stay every other year. So, your tenant is highly unlikely to evict, and you won’t have to find and market tenants every year.
Fast Unit Lease-Ups
Given the current economic conditions due to the ongoing pandemic, there are way more people waiting to book Section 8 housings than there are available Section 8 houses. There is a long waiting list for Section 8 housing in almost all counties in the country. As a result, even if your tenant evicts and moves out of your home, there are always many other pre-screened tenants waiting to occupy your rental place for the same (or even better) price.
With Section 8, you have the chance of earning a lot more monthly income as compared to conventional rental housing. How? The housing authorities are aware of the shortage of Section 8 rental houses, so they give leeway to landlords to set the rental rates higher than the fair market value. Plus, there are little to no marketing costs for your property, as you can list it on the local housing authority’s website. Thus, you are guaranteed to rake in more money with such properties.
The Disadvantages of Investing in Section 8 properties
Every coin has two sides, and Section 8 is no different. Here are the disadvantages of investing in Section 8 properties.
Frustrating Approval Process
The process to get your property approved can be frustrating. It is a government service, so there is a lot of red tape and paperwork involved. You have to be more involved in your property, and the entire process can consume a lot of time (and potentially money).
Delayed Payment Processing
You will find your tenant quickly, but you will only get the first rental payment after around 60 days, as that is how long the first payment process takes. This applies to each new tenant that rents out your property to. But depending on your location, this process can be a bit quicker, but usually, it takes up to 60 days.
Additional Inspections Required
Housing authorities require you to carry out additional inspection of your property to ensure it meets the code, is safe for occupants, and does not have any factors that may make the tenants’ lives difficult. You have to do this every time a new tenant moves into your home and also every year.
Investing in Section 8 housing is not as simple as buying a house and giving it out on rent. It requires more than just money; it requires effort and time on your part. If you are willing to put in the effort and time, Section 8 rental housing can be quite profitable. The decision lies on you—whether you are ready to invest the time and energy into the property or not.