Section 8 rentals can be a lucrative investment strategy, offering both stability and cash flow. This blog post delves into the insights shared by Mike Curidossi, a seasoned real estate investor who has successfully navigated the complexities of Section 8 housing. With a portfolio worth over twenty-two million dollars and a monthly cash flow exceeding forty-six thousand dollars, Mike's approach is both inspiring and informative.
Understanding Section 8 Rentals
Section 8, officially known as Housing Choice Vouchers (HCV), is a government program aimed at providing affordable housing for low-income families. This program allows tenants to pay a portion of their income toward rent, while the government subsidizes the remainder. Mike specializes in this niche and emphasizes its potential for consistent income.
The Benefits of Investing in Section 8
One of the primary advantages of Section 8 rentals is the guaranteed income from the government. Mike highlights that this income is not only reliable but often increases annually. He explains that HUD (Department of Housing and Urban Development) regularly raises fair market rents, which landlords can leverage to boost their rental income.
Stable Cash Flow: Mike averages over a thousand dollars in cash flow per unit after all expenses.
Long-Term Tenants: Section 8 tenants tend to stay longer, averaging 8.75 years in their rental units.
Government Backing: The government covers a significant portion of the rent, reducing the risk of non-payment.
Finding the Right Properties
When looking for Section 8 properties, Mike focuses on specific criteria to ensure profitability. He emphasizes the importance of location and property type, typically favoring three-bedroom units. These units often yield higher rental rates and attract families, which aligns with his goal of providing stable housing.
How to Determine Rental Rates
To ascertain how much Section 8 will pay for a property, Mike recommends checking HUD's published payment standards. This information can be found online by searching for the relevant ZIP code or area. Additionally, he points out that different housing authorities may offer varying rates, making it essential to research local standards.
Mastering the Application Process
Mike stresses the importance of a thorough application process to mitigate risks. He employs several strategies to ensure he selects quality tenants:
Verification of Previous Landlords: He contacts previous landlords to confirm tenant history and reliability.
Property Inspections: Conducting inspections of potential tenants' current living situations helps identify any discrepancies in their applications.
Utility Bills: Requesting recent utility bills ensures tenants are responsible and can transfer utilities to their new rental.
Maintaining and Managing Properties
Mike emphasizes that being a good landlord is crucial for success in this niche. He believes in providing quality housing and maintaining open lines of communication with tenants. By being responsive to maintenance requests and ensuring homes are well-kept, he fosters positive relationships that lead to tenant retention.
Challenges and Solutions in Section 8 Investing
While Section 8 investing offers numerous benefits, it also comes with challenges, particularly regarding paperwork and inspections. Mike advises that landlords should be prepared for these hurdles:
Paperwork: Keeping track of inspections, tenant correspondence, and rental agreements requires organization and diligence.
Inspections: Properties must meet specific standards to qualify for Section 8. Mike recommends being proactive about repairs and maintenance to pass inspections smoothly.
Future of Section 8 Rentals
The future of Section 8 rentals appears promising. As Mike points out, the demand for affordable housing is only increasing, especially in markets where waitlists for vouchers can extend up to eleven years. This trend indicates that the need for landlords willing to accept housing vouchers will continue to grow.
Real-Life Success Stories
Mike shared two notable deals highlighting the potential of Section 8 investing:
Deal One: Eighteen-Unit Purchase
Mike purchased an eighteen-unit building for $4.6 million. The existing gross income was around $43,800, but after identifying the potential for rent increases, he managed to raise it to over $56,000 within ninety days. This increase in net operating income significantly boosted the property’s value, demonstrating the power of understanding local housing authority rates.
Deal Two: Eight-Unit Building
In another instance, Mike acquired an eight-unit building for $1.7 million. By partnering with an organization that leases the entire building, he ensured consistent income without the hassle of tenant turnover. The property was set to generate over $20,000 in monthly income after renovations, showcasing the lucrative nature of master leasing.
Conclusion
Investing in Section 8 rentals can be a rewarding venture for those willing to put in the effort. Mike Curidossi’s experiences underscore the importance of thorough tenant screening, understanding rental rates, and maintaining quality properties. As the demand for affordable housing continues to grow, opportunities in this niche are likely to expand, making it an appealing option for real estate investors.
For those interested in learning more about Section 8 investing, Mike offers resources and courses through his website, Section8DoneRight.com. By sharing his knowledge, he aims to empower others to succeed in this unique and rewarding investment strategy.
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