INVESTING IN SECTION 8 RENTAL PROPERTIES
Section 8 is a government backed housing program which offers rental assistance for low income families.
There are a lot of myths and stigmas associated with investing in section 8 rental properties.
A question I am often asked by investors is which properties are eligible for section 8?
The answer is that almost ANY property can be a section 8 rental since section 8 is determined by the tenant NOT by the property.
As long as the tenant qualifies for housing assistance and they can find a landlord willing to rent to a section 8 tenant then that property can be a section 8 rental.
In order to qualify for section 8, tenants have to apply with their local Housing Authority. In most cities there is a backlog of tenants looking for housing and only a limited number of vouchers are released each year (based on need).
Tenants have to show that their annual income is below a certain level and this amount is adjusted depending on many factors such as their income, how many children they have etc.
If they apply for section 8 and are approved, then they are eligible to receive a housing voucher.
Their housing voucher may pay all of their rent or only part of their rent. The rent is paid to the owner of the property via direct deposit (or check).
The section 8 tenant receives their voucher and is given a certain period of time (typically 45 days) to find a rental property.
There are NOT many section 8 properties available and there are many more tenants than there are houses.
There is a very high demand for section 8 properties which makes these properties very easy to rent for landlords.
The annual rent is determined by the Housing and Urban Development of the U.S. Government (HUD).
Each city has their own housing authority. And each housing authority assists tenants (and landlords) in matching up rental properties with tenants.
Landlords can advertise their properties for rent at their local housing authority. They can also post these properties for rent on the section 8 web site.
In order for you to see the types of returns that are possible as an investor here is an example below of a current turn key rental property for sale:
TURN KEY SECTION 8 RENTAL PROPERTY
Purchase Price $ 100,000
Down Payment 20 %
Closing Costs $ 2,500
Total Cash Investment $ 22,500
MONTHLY CASH FLOW
Gross Rental Income $ 1,000
Principal & Interest Payment $ 429
Property Taxes $ 79
Insurance Expense $ 80
Monthly Cash Flow $ 412
Annual Cash Flow $4,944
ADDITIONAL ANNUAL EXPENSES
Maintenance Expense (5%) $ 600
Vacancy Expense (5%) $ 600
Property Management $1,200
Total Additional Investment Expenses $ 2,400
Net Annual Positive Cash Flow $2,544
RETURN ON INVESTMENT
Annual Return $ 2,544
Total Initial Investment $ 22,500
Total Return On Investment 11.3 %
Annual Mortgage Principal Pay down $1,180
Annual Tax Benefit $1,000
Total Annual Tax Saving And Mortgage Reduction $2,180
Estimated Annual Appreciation Rate (8%) $8,000
TOTAL INVESTMENT BENEFITS $12,724
If you are interested in learning more about turn key rental properties please contact our office at 561-948-2127 (Mon to Fri 9 a.m. to 5 p.m. EST) or email our customer support desk at [email protected]