More and more people are getting into real estate investing, as the real estate investment sector has proven to be profitable for those who started early in their career. Making money in real estate can be done through many channels, whether passive or active. Finding the right real estate investment opportunity is the struggle of most young investors. However, the real estate world has many investment strategies that can be implemented by beginner real estate investors; the most common one is buying rental properties.
Buying rental properties has proven to work for many real estate investors. If there’s anything you can count on, it is the people’s need for home and shelter. This investment strategy can generate enough monthly income to cover the costs of the rental property, including maintenance and even mortgage payments. Keep in mind that a real estate investor must always find tenants for investment properties to keep the cash flow going. As a real estate investor, you must grab any lucrative opportunity to invest in the real estate market. Section 8 rentals are just that. Real estate investors must know how to make money in real estate through section 8 rentals.
So, what are section 8 rentals?
Section 8 rentals is the popular term for section 8 of the housing act of 1937 which authorizes payment of rental assistance on behalf of low-income homes. In other words, section 8 helps families and individuals who are unable to pay their rents. It is funded by the U.S. Department of Housing and Urban Development.
To be eligible for the program, the household must not exceed the area limits that are set by the U.S. Department of Housing and Urban Development.
Related: Investing in HUD Homes: The Basics
What makes section 8 rentals a good opportunity for real estate investors?
Guaranteed payments every month
Renting out a property as a section 8 rental guarantees you as a property investor a stable monthly rental income. Section 8 rentals are under a governmental voucher program; after a person or a family applies for the program, the government gives them a voucher for 70 to 80% of their monthly rent.
The program is known for being reliable and issues are rare to occur.
Raising the rent yearly
The program allows for rent increases. While renting out a property under the section 8 program, the property investor can raise the rent by 8% annually. This is a big advantage for real estate investors who own such investment properties.
Tenants are usually looking for a long-term rental
This can help save any landlord a bundle. Tenants who are looking into section 8 rentals are generally looking for a home for the long haul. This can reduce your property’s overall vacancy and help you generate as much rental income from your property as you can all year-round.
Tenants are obliged to take care of your property
The program deals with many issues that landlords care about; it obliges the tenants to take excellent care of your investment property and usually requires them to maintain it as well.
The section 8 program helps many
The section 8 program helps over 2 million people every year. It makes sense that real estate investors and landlords would want a piece of the income generated by the program.
Issues that section 8 landlords face
Entering the program is a lengthy process
As most governmental paperwork seems to work you into a maze, section 8 rentals are not different. The paperwork needs to be done properly or you risk having an empty rental property for months.
Qualifications and inspections
If you’re looking into making money in real estate through section 8 rentals, you must be ready to meet the qualifications of the program and go through the inspection process. Most landlords will go through a few inspections until their property is up to code.
Delayed first rent check
After getting your property occupied, you might have to wait a few months until your first check arrives in the mail. This can be an issue as you will have to spend from your pocket to cover the costs until the payment is processed.
What can you do as a landlord to ensure a peaceful and organized rental property?
- Set the rules and don’t be afraid to enforce them. It’s important to keep in mind that you are doing this for profit. Yes, enlisting your rental property in the section 8 rental program is a good thing for the community, but the purpose of having a rental property will always be making money.
- Screen tenants as best as you can. It’s important to ask for work papers, recommendations, or even paycheck slips. Perform a tenant screening as if it were for any other rental property you own. Just like all other tenants, they can be good or bad and it is your responsibility as a landlord to find the best headache-free tenant for your section 8 rentals.
- Visit your rentals regularly to ensure that things don’t get out of hand. This can help you catch problems early and maintain the investment property.
Are section 8 rentals a good real estate investment for you?
The answer to this question varies from one person to another and from an investment property to another. Most successful real estate investors will tell you to try everything once. You must evaluate your situation and see what you can and can’t do. It might be a headache to go through the application process but it can be rewarding for the real estate investor in the long haul.
The real estate market is large and varies at many angles, but it’s every real estate investor’s duty to find the best real estate investments that best suit his/her situation. There is no right or wrong answer to enlisting your properties as section 8 rentals. We recommend that you read extensively about becoming a landlord for this type of rental properties; this way you can make your decision and learn from others mistakes.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.