Section 8 Housing: What to Expect as an Investor

Section 8 investing is one of the most polarizing topics in real estate. Some investors swear it’s the easiest money they’ve ever made; others say they’ll never touch it again.

In reality, Section 8 is a lot like any other type of real estate investment. It’s not a magic solution, nor is it a guaranteed nightmare. Like most things in real estate, the outcome depends on how you buy, who you rent to, and what expectations you bring to the table. 

In this article, we’ll walk through the basics of Section 8 investing. Read on to find out what Section 8 is, common myths and misconceptions, what to know about approval periods and inspections, and the most important make-or-break factors in finding success.

What is Section 8?

Section 8 is a federal housing assistance program designed to help people afford safe housing while they work toward stability. Approved participants receive a voucher based on household size and local rent limits, then use that voucher to rent a qualifying home.

For landlords, this means:

• Rent is paid directly by the government
  
• Payments are consistent and predictable once the lease is active
  
• Tenants often stay longer than traditional renters
  

Common Myths and Misconceptions About Section 8

Myth #1: Guaranteed Payments = Guaranteed Success

It is important to remember that the rules of the rental business stay the same no matter who is paying the rent.

Knowing you’ll receive a check on time every month is only one part of the equation. You can still pay a hefty price for the same things that would get you in trouble renting privately. If you, for instance, buy a bad property and/or in a bad area, underestimate wear and tear, have long vacancies, or place tenants who cause major damage, you’re more likely to lose than win.

Section 8 can stabilize income, but it can’t turn a weak deal into a strong one. 

Myth #2: Section 8 is a Fast Track to Cash Flow

Once again, all else being equal, knowing that the rent will be paid is not the same as knowing you’ll profit. 

The same math as with any other rental still applies:

Rent - (maintenance + insurance + taxes + financing + management + vacancy) = profit

In other words, how much or little cash flow a property generates usually has more to do with how much money you have to put into it than with how much rent you can get out of it.

For most investors, Section 8 works best as a long-term wealth strategy, not a short-term income play. Appreciation, loan paydown, rent growth, and tax benefits do the heavy lifting over time, just as they do with any other rental property. 

Myth #3: Section 8 Tenants Are Always _________

Whether Section 8 tenants are the best or worst you can find depends on who you ask. Some say Section 8 tenants are more motivated to be clean and respectful so that they don’t lose their vouchers. Others will tell you that they’re guaranteed to bring endless drama and tear your property to bits. 

In reality, Section 8 tenants, like all tenants, can be great or awful. Any sweeping statement that they are always one or the other is incorrect. 

It doesn’t matter if you’re renting to someone who can afford a $25K per month luxury condo or someone who needs help from the government to afford a modest apartment; economic status  character. Everyone has their own story, so screen your tenants. Always. 

Key Differences Between Section 8 and Private Rentals

Section 8 Usually Means Longer Vacancies and Longer Tenancies

Compared to private-pay tenants, leasing to Section 8 usually takes more time on the front end. Paperwork approvals, inspections, and scheduling can extend vacancy.

However, once a good tenant is placed turnover tends to be lower, lease renewals are more common, and overall long-term stability improves. In rental investing, fewer turnovers often matter more than quick placements. As long as you’ve screened carefully and placed the right resident, this can be a big upside. 

Properties Undergo Regular Inspections

One of the unique features of Section 8 investing is inspections. Properties are inspected before move-in and then periodically after that–usually once per year.

Something to keep in mind when it comes to inspections is that they’re carried out by human beings, so they come with a degree of subjectivity. You might pass easily one year and then get flagged the next for things that weren’t an issue before. They may be working from the same checklist, but the reality is that different inspectors have different standards.

Even if an inspector finds need for improvement, what ultimately matters is how you respond. Fix issues quickly, stay organized, and maintain a healthy budget for repairs and you should be just fine. Ignore inspections or drag your feet, on the other hand, and you risk payment delays or losing eligibility altogether.

Make-or-Break Rules of Section 8 Investing

Rule #1: Never Let a Tenant “Pay the Difference”

This is one of the worst mistakes that investors make when it comes to Section 8 investing. It is also extremely common. 

It usually goes something like this: 

A property rents for $1,000 but Section 8 only approves a prospective tenant for a $900 voucher. Then the tenant says they’ll “cover the extra $100” or even pay more than that.

Then the landlord thinks “ok, well just because they can’t afford $1,000 a month on their own doesn’t mean they can’t afford $100. Why not?”

It all seems so reasonable… until it doesn’t.

Once the lease is signed at a set amount, that’s all Section 8 is obligated to pay. If the tenant stops paying the extra amount, you have no backup and no leverage. You can’t go back to the housing authority to recover the difference. Not only will they tell you it’s not their problem, they’ll tell you it was illegal to try and get the tenant to make up the difference in the first place

Bottom line: only count on what Section 8 approves. 

Rule #2: Choose the Right Tenants

A great Section 8 tenant can be clean, respectful, long-term and stable, easy to communicate with, and motivated to protect their voucher. A bad one can cause just as many problems as a bad private-pay tenant.  

If a difficult person is eligible for a voucher, dealing with them will still be a nightmare. 

Even if you’re getting a check every month, a destructive tenant will still cost you money. 

Tenant screening isn’t just a matter of determining whether someone can pay. Screening is about finding residents who are a good fit. Make sure you vet tenants carefully no matter who is footing the bill. 

Rule #3: Buy in the Right Area

The area you buy in is a crucial factor for landlords aiming to find Section 8 tenants. 

A landlord who thinks they can buy the cheapest house in the worst part of town, place a Section 8 tenant in it, and watch the money roll in is dreaming. A landlord who thinks they can trick the government into buying them a house in the most affluent neighborhood in town by placing a Section 8 tenant in it is also dreaming. 

Tenants are not going to choose housing that isn’t safe, and the government isn’t going to pay for luxury. 

Section 8 investing works best in C-class neighborhoods where you can find the right balance of safety, quality, and affordability. 

Rule #4: Offer a Quality Product

It’s important to remember that those who utilize Section 8 benefits may be down on their luck, but they still have standards– and options. 

People might choose to live in substandard housing if it’s all they can afford, but the whole point of a voucher system is that it enables people to choose quality housing. It also means that landlords who cater to Section 8 tenants still have to compete on the open market.

For instance, say one landlord is offering a dilapidated house with all the doorknobs and lightswitches painted over for $1,100 per month, and another landlord offers a carefully renovated house with a new kitchen and bathrooms for $1,100 per month. It doesn’t take a genius to figure out which vacancy a Section 8 tenant with a voucher for $1,100 per month is going to fill. 

Bottom line: Section 8 may be a social program, but it’s not a way for landlords to escape the basic rules of economics.

So, Is Section 8 Worth It?

Just like renting privately, Section 8 is never guaranteed to be one thing or another. Whether landlords find success depends mainly on preparation and expectations. 

It tends to work best for investors who:

• Buy in stable, working-class areas
  
• Screen tenants carefully
  
• Budget conservatively
  
• Treat rentals like a business
  

If you’re looking for fast, effortless cash flow, Section 8 isn’t going to magically deliver it. But if you’re playing the long game and willing to manage the details, it can be a solid part of your rental portfolio.

Interested in learning more about how Section 8 can fit into your strategy? Reach out to one of Evernest’s Investor-Friendly Agents to talk neighborhoods, properties, compliance, and more.