Why Section 8
INVESTING FOR SECTION 8 RENTAL INCOME
About the Section 8 Program Section 8 is a federally funded rental assistance program that pays private landlords a percentage of the approved rents for their rental units. The tenant is responsible for their portion of rent and if they default, it could put them at a risk of losing their voucher. In many cases, depending on the tenants’ household income, the Housing Agency pays 100% of rents directly to the homeowners. The houses have to pass the Section 8 housing inspection and meet all requirements in order to qualify for the program. Our cash flow properties have passed the housing inspections and are already approved units. Most of them are already leased so that our end buyers can enjoy immediate income from date of purchase.
Many landlords are participating in the Voucher Program (Section 8) due to the many advantages described below:
ADVANTAGES OF BUYING SECTION 8 PROPERTIES
1.Guaranteed Rent Payments: For section 8 tenanted units, the housing agency usually disburses rents on the 1st day of each month. As long as the properties have passed the inspections and are in compliance with their requirements, rents are paid on a consistent basis for as long as the tenant decides to stay in the unit. Some tenants hold vouchers for up to 10 years. Our leases are usually 1 year leases and the landlord could choose to increase the rent or place a new tenant after the initial lease period. The payments will continue unless the tenant or landlord decides to terminate the agreement.
2. Abundance of tenants There is an abundance of voucher holders and Section 8 properties are in high demand in certain cities like Toledo. This is a major advantage when you are a Section 8 landlord. You may be able to enjoy higher rents and lower vacancy rates. Due to the increasing demand for quality section 8 housing, tenants are not motivated to move. Thus units tend to stay occupied and cash flowing for years. Rent increase could be applied for by the home owner after the initial lease period. With a combination of higher rents and lower vacancy rate, this results in higher overall returns.
3. Longer-Term Renters Section 8 tenants are likely to stay for a longer time than private pay tenants due to the increasing demand and competition for section 8 housing. As a result, the vacancy rate can be lower resulting in higher returns.
4. Higher rents When compared to market rate comparables, section 8 approved rent rates are relatively higher. For eg. A typical 3 bedroom property could be approved for $800 through section 8 while a market rate tenant could expect to pay about $750 for the same unit in that particular location.
5. Tenant cannot have delinquencies If a tenant defaults in their utility payment or their portion of rent, an eviction could be filed by the landlord. If the government agency is informed of this action being taken, the tenant could lose their voucher. Tenants are aware of this and they usually pay on time or make arrangements promptly if they are having challenges during a particular month.