We think King Solomon would have approved of landlords choosing to invest in the Section 8 housing program. Not only do you provide one of life’s basic necessities for low income earners, you can make a nice profit in the process. And while investing in Section 8 income properties might not be for everyone, it’s worth a look, in Jason Hartman’s opinion.
Here is a short list of the pros and cons of Section 8 investing.
Guaranteed Rent: Probably the biggest pro of all is that, as long as the United States government continues to function, you will get most of your rent on time every month. And you’re not going to have to shake them down for it. While Section 8 tenants are responsible for part of the rent, a failure to pay can cost them their housing voucher, so they tend to make it a top priority.
Extra Screening: In general, pre-screening tenants can be a big, fat hassle. With Section 8, the government takes the task out of your hands. It’s “their” money, so they want to put deserving, reliable people in place. While they housing authority does look at income levels, they also have been known to disqualify those with criminal records, which is a bonus for you.
Free Advertising: Section 8 units are listed not only with local housing authorities but on the Department of Housing and Urban Development national website as well. Thanks to the reduced cost to occupants, these properties are popular and usually don’t stay vacant long. Another landlord headache gone.
Inspection City: Your property must pass an inspection to get into the Section 8 program in the first place, and there remains the possibility of routine inspections thereafter. Better get comfortable with the idea.
Rent Control: While the housing authority doesn’t tell you exactly what rate to charge, monthly rent has to stay within the median for the area. This means your super-tricked out condo in a bad area might not bring in as much as you like.
Wear and Tear: The biggest fear, hands down, for Section 8 landlords is that their property might get trashed by tenants who aren’t paying much for the privilege of living there, so why should they care? It’s an unavoidable issue arising from human nature. You can minimize the risk by screening carefully and keeping a close eye on your investment.
There you have it. Section 8 may be no panacea but it’s something income property investors should think about. (Image: Flickr | Jun Acullador)