When it comes to investing in Birmingham rental real estate, buyers have a lot of options. If you’ve stayed out of Section 8 housing as an investor, you’re making a mistake. We understand the stigma that surrounds public housing programs, but if can get beyond that and think about the opportunities that exist for you, it’s a great way to earn some steady cash flow and increase your ROI. It’s also a good way to make a difference in the community.
Section 8 is a voucher program that’s funded federally, by the Department of Housing and Urban Development, and administered locally, by the Housing Authority of the Birmingham District. It’s a program that’s designed to assist tenants who can’t afford housing on their own.
There are several advantages to engaging with residents who come to you with a housing voucher.
Rent Payments are Consistent
The first benefit to rental property owners in this program is that rent is paid consistently. Your Section 8 tenants are unlikely to be late with their rental payments because all or most of the rent comes directly from the government. Once an applicant is approved for Section 8 housing and passes the government’s screening criteria, they receive a voucher that’s usually going to cover 70 to 100 percent of their monthly rent. Your rental income won’t be dependent on your tenant’s job security or financial stability. That can offer a lot of peace of mind.
There will be an initial processing delay when you accept a Section 8 tenant, but once that comes and goes, you can expect on-time rental payments in full from the government. It’s hard to find that kind of consistency and stability with even your most highly qualified private paying tenants.
Incentive to Keep Up with Maintenance
A lot of owners hesitate to enter the Section 8 program because there are inspection requirements. It can feel intrusive to have inspectors poking around your property before you rent it out, asking you to make repairs that you may not feel are necessary. However, this can also be a benefit. It means your rental property is in excellent condition. There’s not going to be any deferred or unreported maintenance hiding out. That’s good for your tenants and it’s also good for your property value.
Your tenants also have some responsibility for maintaining your property. That requirement will protect the value and the condition of your investment.
Larger Birmingham Tenant Pool and Higher Retention Rates
Your vacancy loss will be much lower when you rent to Section 8 tenants. That’s because these properties are in high demand. In Birmingham, there is a Section 8 waiting list. It’s a stable pool of tenants, which is especially beneficial to owners who understand how painful and expensive long vacancies can be. You’ll be opening your property to a larger group of prospective tenants, allowing you to get it off the market and rented quickly. That’s good for your cash flow.
There’s also better retention among Section 8 tenants. They understand that finding good housing isn’t easy, and they’re willing to stay in place and renew their leases. This saves you money not only on vacancy costs, but on turnover expenses as well.
When you rent your Birmingham home out to Section 8 tenants, you’re not losing rent. You can raise your rent regularly just like you would with any other tenants. You don’t have to relax your screening standards, either. You can screen for credit and past evictions and rental history just like you would screen any other tenant.
We think investors should strongly consider the Section 8 housing program, especially if you have a great Birmingham property management team that can navigate the process for you. If you’d like help with this, please contact us at Decas Group.
