Posted by Jimmy on September 18, 2005 at 07:59:45:
this discussion forum really is not the appropriate place to ask about Section 8. but since you asked,I will offer you a few thoughts, based on my experience with Section 8:
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Never put yourself in a position where you depend on the government. If you do, you become a welfare case. Think I’m kidding? Consider this: If you buy a rental property in an area where the only way to get your desired rent is through the housing agency, you just entered the welfare rolls. If you buy a rental property in an are where there are nothing but Section 8 tenants, and other people will not go there, you just entered the welfare rolls. I made both of these mistakes early in my REI career. and I am paying for it now.
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Vouchers ebb and flow. For the past 18 months or so, there has been very little new money pumped into the HUD budget, and this has greatly cut the supply of new vouchers. In 2002-3, I collected almost 50% of my rent from vouchered tenants. Today, it is closer to 25%, and declining all the time. To get some of my units occupied, I have had to cut rents by as much as 20%. There simply are no vouchers available, and that is the only way to get my desired rent in certain of my units.
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Try to identify areas where you can attract all kinds of tenants. Elderly are my favorites. Students are my least favorite. Lower income people in their 20’s are a nightmare. use common sense.
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When evaluating a purchase, make sure you have accurate info re: market rents. If the Section 8 rate for your property is $750, but market rents are really $650 (i.e., that’s all you could expect to get from a non-vouchered tenant), You MUST use $650 as the prevailing rent for your calculations. Because the current vouchered tenant will vacate on you, and you wil have to fil the vacancy. and you have no guarantee of finding another voucher.
good luck.