Everyone asks when they hear I am a Section 8 landlord. “Mike, aren’t Section 8 tenants awful? Aren’t they the lowest of the low? Aren’t they going to skip payments and damage your property? Aren’t they going to complain about everything and cause a nightmare scenario for property management? How do you sleep at night dealing with these people?”

Section 8 is a federally backed government program established in 1974 to assist low-income households in the United States.

The property type (i.e., Single Family Dwelling, Condominium, Townhome, Manufactured, Multi-Unit, etc.) is critical as it will greatly impact your ability to scale and repeat your process. The S8S model is focused on long term positive cash flowing properties which can be scaled and self-managed. Let’s review the many variables that come with different property types and why S8S only purchases Condos and Townhomes.

Do you have at least $46,000? If the answer is no, you will likely have to save a little more to have enough cash to apply towards a down payment or try and find a property that can be purchased for less than $175K which depending on your location this might very well be easy to do. If you’re still in the process of saving for the down payment, there are a lot of different financial blogs and self-help guides that will help you manage your finances so you can acquire a property. 

Quality long term tenants are critical to cash flow. Whether tenants are Section 8 voucher holders or unknown third-party renters there are screening tactics that can be applied to effectively mitigate risks of signing a bad tenant. 

At this point you now fully understand your budget, your target rate of return (Cash on Cash, Cap Rate, Debt Coverage Ratio, etc.) as well as what the FMR is for the area you're purchasing in. 

The next step is to ensure your unit is going to pass inspection so it can quickly generate a positive cash flow. Below are the steps to ensuring you pass this inspection and get your unit rented out quickly and with a long-term tenant.

Managing your property can feel a bit overwhelming, especially your first unit. Mentally you may feel like it's a second job or at least a part-time job. However, if you have followed the process thus far, I can reassure you that you will not spend more than 3 hours per unit per month managing your property on average.

A Limited Liability Company (LLC) is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. 

Self-managing 1 unit will not be overwhelming, and it will not require you to be a paperwork warrior nor a DIY workhorse. However, let's assume it will and therefore create a scalable model so you can manage 1 unit or 25 units on your own with proper processes and measures in place. A reminder that our goal at Section 8 Secrets is not to own 200+ units.

Renewing lease agreements means success in many categories: consistent cash flow, quality property management, and well screened applicants to name a few. Low tenant turnover will be critical to scalability and limits the amount of time involved in managing your rentals. 

While an Eviction is not a change of ownership it's certainly worth reviewing and related to a change in tenant. Evicting a tenant can take around 30 to 60 days, depending on the reason for the eviction and whether the case is held in district or small claims court.

Refinancing allows you to lower your monthly payment while also accessing cash that will not be taxed. It is best to use a refinancing strategy when equity and appreciation have built up the existing property value and/or when mortgage rates have dropped by 1% or more compared to your current loan. 

Positive long-term cash flow, property appreciation, and compounding real estate are 3 principal benefits the Section 8 investing model will foster. Similar to reinvesting dividend earnings from a stock holding to purchase more stock, compounding real estate profits can be viewed in similar fashion except in compounding real estate you will have more security, greater profits, and be in full control.

This is the model I have been refining and using for the last 15 years acquiring real estate for the purpose of leveraging the Section 8 program.