Section 8... Good or Bad?

Everyday I have the same phone call.

“Josh, I want to invest in RE and I think I want to go the route of Section 8. They pay every month on time, they are government funded, and the properties are cheaper. Do you think that this is a good investment strategy?”

There are a lot of opinions out there regarding section 8. Mine is one of years of experience in the trenches in dealing directly with Indianapolis Housing Authority and the section 8 program.

Is it nice once the tenant is fully moved in, section 8 is paying, and there are no maintenance requests..? Yes, of course it is.. but how long does that take?

One average, from the day that a section 8 tenant says that they want the property and we submit the RTA, it takes about a month to get the tenant moved in with section 8 recognizing them as an active tenant. FROM THERE it can take up to another 60 days for section 8 to issue the first payment.

That means that you will have had to float the mortgage for at a minimum 2-3 months, that’s not including the time that it takes to actually find a tenant who wants to rent the property.

The next biggest hurdle is the inspection phase. IHA has a public checklist that most of the time hangs up investors. Supposedly, the items on the checklist are the items that they are looking for and are the only repairs that will cause a unit to fail. I can personally attest to the fact that this is not true in the slightest. We have had units that failed for items that section 8 wanted changed which went directly against building code, they have broken items in our units while “inspecting”, they have called out things to be repaired that had nothing to do with our properties like fence lines, and neighboring trees, and much more.

Some of these items you can push back on and fight. Sometimes that works, sometimes it doesn’t. Just be prepared to spend some money in order to get your property into the condition that section 8 wants in order to authorize a move-in.

On a more positive note, I do think there is one thing that section 8 has that is better than a traditional tenant by a pretty large margin..

Section 8 tenants typically stay for a very long time. I’m talking 5-10 years. And once your tenant is in and IHA is paying, having the mortgage covered by someone else for 10 years is any investors dream.

The move process for section 8 is not exactly easy and a lot of times can drag on for quite a long while for the tenant. This often causes the tenants to just end up staying in the property that they are in even if they don’t love it. If you take care of the property and the tenant, they typically will have a long residence at your unit.

There are many more things to be said about section 8 in detail, not to mention the fact that IHA proclaims that they pay 110% of market rate for rent..

If you want to learn more about section 8 and the process, I am also happy to answer questions!

Make sure to follow our podcast Hoosier Homes Podcast for more thoughtful insight regarding RE!

Happy investing!