This Is How To Buy Section 8 Housing

Section 8 investing has become extremely popular lately, but most folks don’t know the first thing about how to actually buy section 8 housing. 

I get it. 

It’s overwhelming and the whole thing seems like a bit of a black box.

In fact, when I first heard about section 8 investing many years ago, it sounded too good to be true.

I didn’t know how to buy section 8 housing largely because I thought it was too complex to get started. But that all changed when I purchased one of my first Detroit rental properties.

That home did a lot to demystify section 8 investing, and I’ve gone through the section 8 process several times in my personal portfolio.

There are really only two strategies for buying section 8 housing. You can buy a home with a section 8 tenant in place, or you place one yourself. Each of these have benefits and drawbacks.

The good news is I’ve done both, so I’m going to tell you how I’ve experienced them firsthand.

Strategy #1: Buying Section 8 Housing With Tenants

As mentioned at the start, I bought this awesome Detroit Tudor style home as one of my first rental properties. 

It was actually occupied by a section 8 tenant at well below market rate rent.

That tenant is still in the home today, and it’s been a great experience overall. That said, with the rise in popularity of section 8, I believe it’s far harder to find homes with strong section 8 tenants in them.

But if I were looking to purchase a section 8 occupied rental today, here’s what I would do:

Search Zillow For Section 8 Houses

The first thing I would do is search my target market for the keyword “section 8”. You can easily do that in Zillow.

And when I do, I see there are 118 “applicable” results:

Yes, I put applicable in quotes there because you’ll quickly find many of these are not at all what you want.

Many of the listings don’t even include the keyword “section 8” in the description. I have no idea why.

And a bunch of listings are referencing the section 8 keyword but not in the way we want. For example, they might say, “Perfect for a section 8 tenant”.

In fact, I looked at the first 10 listings and only 4 of them had section 8 tenants in place.

So this list will shrink, and it’s a tedious process!

Evaluating Potential Section 8 Purchases

Once you get through the Zillow sifting you’ll need to start doing the hard work of evaluating these properties.

Are the locations decent? Do the cash flow numbers make sense? Are you in danger of falling into what I call the “return trap”? What are your property taxes going to be?

If you don’t know how to do all of this and you’re looking in the Detroit market, I highly recommend checking out my course that covers all of these topics in detail.

It’s a lot to work through and it can be frustrating when you realize you do it all and none of the properties make sense.

But let’s look at the benefits and drawbacks to buying section 8 housing this way.

Pros & Cons Of Buying Tenant Occupied Section 8 Rentals 

The biggest benefit to buying with a tenant in place is you don’t have to go through the paperwork and inspection.

Someone else did all that work for you.

And it can be a huge win!

That said, you aren’t getting to vet your own tenant. And that can be a disaster, especially today.

Section 8 investing has become so popular that a lot of locals are taking advantage of out-of-state investors that don’t understand the market.

They are doing very little to vet tenants, and largely screening them by their voucher amounts rather than credit & rental history, employment, credit, etc.

These are all extremely important things even with section 8 tenants!

These guys are often not collecting security deposits in an effort to attract the highest dollar voucher holders. 

It can be a recipe for disaster.

If buying section 8 occupied homes sounds like a lot of work or scary, let’s look at the alternative.

Strategy #2: Placing Section 8 Tenants Yourself

This is the strategy I prefer, and I’ll get into why in a bit. But the idea here is quite simple… you have a rental property and you place a section 8 tenant yourself.

But a lot of people are overwhelmed by this and don’t know how to start. 

Each market may be different, but this is the general process in Detroit.

Finding Your Section 8 Tenant

The first step seems obvious, but it often isn’t. You need to market your property as you normally would.

There is no special way to get your property “accepted” for section 8 tenants. You simply start looking for a tenant.

When you list your rental, make sure you clearly state you are seeking for a section 8 tenant. I list on Zillow as well as AffordableHousing.Com.

Once you do find a prospective tenant you’ll want to screen them like anyone else. But you’ll also want to make sure they have what is called their “moving packet”. 

This means they’ve already been accepted into the program and are ready to go. They just need to find a home.

Doing The Paperwork And Inspection

Once you’ve found your tenant you’ll need to sign a lease with them.

That’s what jumpstarts the real process. You will want to get in touch with the prospective tenant’s case manager and get ready for your inspection.

This entire process can take multiple months. But once you pass the inspection your tenant is free to move in.

You’ll also want to make sure you complete any paperwork your housing authority needs to get you paid. 

Your tenant’s case manager is your best point of contact during all of this. Hopefully you have a helpful and responsive one!

Pros & Cons Of Buying Tenant Occupied Section 8 Rentals 

There are two main wins when placing your own section 8 tenant. The first is that you get to hand select the person living in your home.

That’s a big deal, especially when there is so much questionable screening going on with “turnkey” section 8 rentals today. 

Beyond that, you will have an intimate knowledge of the section 8 process. That can be invaluable, especially if you plan to buy more than one section 8 rental.

The obvious drawback here is time. Placing tenants in general can be time consuming but section 8 will take it to the next level. 

Again, it’s a 3-4 month process and, if you aren’t good about keeping on top of people (namely your case manager), that could easily drag out longer.

Related: My post on the pros and cons of section 8 in general.

How To Buy Section 8 Housing The Right Way

There is no one right way to buy section 8 housing. It’s all going to come down to what you’re most comfortable with and what your personal bandwidth is like.

If you buy section 8 housing with a tenant already in place, know that it’s going to take a lot of legwork to find that particular deal. Probably more than you expect. 

And if you’re dealing in a lower price point market you may have a difficult time getting a lot of help from a realtor. The commissions just aren’t worth it.

Placing your own section 8 tenant is a great learning experience. And after you do it once the whole process becomes much easier to understand.

For me, I always prefer buying a property, doing rehab, and placing my own tenant. But that’s not how I started. There can be a lot of value to just getting moving with the lowest friction possible.

So do what feels right, learn, grow, and keep building.