The Truth About Section 8 Nobody Wants to Admit (Section 8 Guide)

[00:00:00]I don't chase around tenants for rent.

[00:00:02]The government deposits it into my account every month like clockwork.

[00:00:07]Here's how. Almost every real estate investor I know has an opinion about Section 8, and I would argue that most of it is negative. But the crazy part is most of these investors have never owned a Section 8 property in their life.

[00:00:22]They're literally operating off of an old stigma, an old idea that was fed to them by other people, your uncle, your grandfather, people who are giving you stories of yesteryear, right? They're telling you about the past, what Section 8 was, how it operated, or how they think it operated when they were younger, in the '90s, in the '80s. But where it's at today is completely different. It's been transformed in many ways that I've gotten to see because I manage and operate hundreds of Section 8 rental properties, and I've been doing it for well over a decade. So, I've seen these changes. I know you've heard the stories about people's house getting trashed. You probably heard it from your grandfather, your aunt, your uncle, one of your friends.

[00:01:10]Oh, no, I had that Section 8 property.

[00:01:12]That tenant wrecked my house. They wouldn't pay the rent.

[00:01:15]I couldn't get them out. They had the free lawyers.

[00:01:18]You're going to hear all the horror stories in the world.

[00:01:22]Like I said, mostly from people who never really done this professionally.

[00:01:26]But I found there's a common theme.

[00:01:29]There's a common thread through all of this stuff. And the common thread is bad landlords, bad management systems, or no systems whatsoever.

[00:01:41]I'm talking about landlords who don't know how to evict. They don't have rental licenses. They don't have proper paperwork.

[00:01:48]They don't do inspections at our properties.

[00:01:51]They put a tenant in a house, and they don't come back. As long as that money's coming in from the government, they don't come back to that house for 2 3 years.

[00:02:00]I can tell you this right now, if you go in 90% of properties, government rental or not, Section 8 or not, and you don't come back and do at least a semi-annual inspection or annual inspection, there's a a very strong chance your house is going to get trashed over the course of time.

[00:02:19]Because people don't take care of rental properties, most people at least, the same way that they would their own home.

[00:02:27]That being said, I've had some amazing low-income, government housing, veteran housing tenants that will take care of that house. I had one set of tenants in South Jersey, they wouldn't even call, they would try to fix everything before they even call you.

[00:02:44]They're calling out plumbers, they're doing stuff on their own dime.

[00:02:47]Things that I've, you know, hadn't really experienced until that point in time. But the common thread is a lot of these people telling you these horror stories, they're bad landlords, they have no systems, they have no knowledge, but the only gift that they can give you is fear.

[00:03:05]Fear about a program that quite frankly can allow you to make millions of dollars in cash flow and get that money direct deposited into your account like clockwork on the first of the month, every month from now through the rest of your life, if you master the systems that I'm going to give you today. So, let's talk about what happens when the government is your tenant. Not Rodney from down the street, not your auntie cuz she need a place to stay, not that person you're trying to help from the church cuz you want to be a good Samaritan.

[00:03:39]Which there's nothing wrong with that, but you will learn that no good deed goes unpunished in the rental property game. A lot of people you want to help are going to hurt you.

[00:03:50]They're going to hurt you so bad, you're going to stop helping. But, here's what happens when a government is your tenant. You get that money direct deposited into your account on the 1st of the month, every month, like clockwork. When it's raining, sleet, hail, snow, that money's still coming through. When there's a government shutdown, that money's still coming through because a lot of the stimulus packages go to reinforce these programs.

[00:04:16]When there's a recession, that money's still hitting. When you get hit with a COVID, that money's still coming through. In fact, I have a story in the middle of 2020, we'll call it March 2020. You guys can go back mentally to what was happening in America during that time. I ran into two guys. This is my personal story. Two guys, they were selling a 110 property portfolio, scattered site throughout the city of Philadelphia. So, 110 individual properties, some multi-family, uh many single-family. The entire portfolio. And these guys started when they were 30.

[00:04:54]So, this may resonate with some of you out there. They started when they were 30. They were two partners. They weren't even brothers or anything, right? They take their money, put it into these cribs.

[00:05:02]They're now 65, 65 years old, and they're looking to sell.

[00:05:07]So, I'm looking at this portfolio. Hey guys, send me the numbers cuz I'd never seen two guys who had built this for this long and just section-8'd everything.

[00:05:17]Even me, I have a a strong weighting of section-8, but I'm not all section-8 like these guys.

[00:05:22]And this is in the middle of all types of moratoriums and you can't evict and shut down this, shut down that.

[00:05:30]What do you guys think their collection rate was? Where you can't even evict somebody and people technically don't have to pay their rent.

[00:05:39]Their collection rate in the middle of all of this, the worst conditions, 95%. I'm looking at their books, I'm looking at the numbers. I'm looking at the direct deposits.

[00:05:50]The information that you need to underwrite a deal, I'm looking at it.

[00:05:54]And I'm thinking, damn.

[00:05:56]This is the truth. If you could fast forward out on your journey 30 years, this is what you will find.

[00:06:03]This is the holy grail of real estate investing. If you can collect 90 plus percent of the rent you are owed, there is no way that you don't get ridiculously wealthy in this game. Cuz those properties are going to appreciate and you're going to have the cash flow to support them. You will have all the cash flow you need to support these deals.

[00:06:24]If there's wear and tear, if there's maintenance.

[00:06:27]So, that is what government money gets you.

[00:06:30]That is how you can take yourself to the next level with the consistency of income while other investors are out chasing checks and you're getting direct deposits. So, here's the truth, the harsh ugly truth about Section 8 tenants that you need to know. One, Section 8 tenants, they're vetted by the government already. They come pre-vetted, unlike your regular market tenant who you don't know from a can of paint.

[00:06:57]The Section 8 tenant has pre-vetting, background checks, criminal background, sex offender, all of that stuff has already been done.

[00:07:05]And in fact, a lot of their financials have already been checked as well.

[00:07:10]So, they're looking at what's affordable to this tenant. Can they afford the rent?

[00:07:15]What voucher size do they need? What type of support do they need? If a tenant falls behind and a lot of these tenants, you don't you guys don't know this, they work.

[00:07:24]They have jobs. Many tenants, they're either working, some are working at hospitals. Some are putting needles in your arm at the hospital making 30, 40,000, still getting Section 8.

[00:07:34]They're on disability, which is a double income benefit cuz they have the voucher and they They the social security disability coming in, so that's double government protection. Government money coming all through the household. They never fall behind on rent.

[00:07:49]Where they can be elderly, which means they're never going to get off of this, right? So, they're going to be taken care of for life, and they're typically not going to move very much.

[00:07:57]In fact, Section 8 tenants on average will stay in your property for 5 to 8 years. A market tenant is going to stay in your property on average for 1 to 2 years.

[00:08:06]So, you can do that math on your vacancy rate. If you're thinking about this logically, how much vacancy are you going to have at a property? And the less vacancy you have, the more uh rent you have coming in. The less downtime you have coming in. But, these tenants are working, so they're factoring in based on their income how much they can afford. Guess what happens if they lose their job? Section 8 starts paying more. I've had tenants where their rent was 3-400 a month, and they lost their job. If a market tenant loses their job, you get zero rent. When a Section 8 tenant loses their job, they go back to their case worker.

[00:08:37]Their case worker says, "Oh, you're not making money? Okay, we're going to pay 100% of your rent."

[00:08:42]So, I had tenants go from paying me 3-400 to zero because the government just took it all on. We got you, baby.

[00:08:49]The government starts sending 100% of that rent to your bank account.

[00:08:53]And I have many tenants where the government pays 100% of the rent. Nothing like it. Talk about not chasing a check.

[00:08:59]100% of that rent deposited into your account every month like clockwork.

[00:09:04]Here's another thing. Section 8 tenants don't want to lose that voucher.

[00:09:09]A lot of these market tenants, even if they have good credit, what do they care? People don't care about an eviction today like they used to because they have many ways of gaming the system to try to hide that information to get into another property.

[00:09:22]But, if you evict a Section 8 tenant, if you get evicted while on Section 8, you lose your voucher.

[00:09:29]This is a new wrinkle that was put in to combat some of the things that were happening in the early '90s in the early 2000s where people were trashing houses. So, they create these new rules that you guys don't know about cuz you're still listening to your uncle's story from 1962.

[00:09:46]But, the new rules say you get evicted here, you're out.

[00:09:50]You lose that voucher, which means they're going to pay that rent. They're going to come up with it.

[00:09:55]In fact, I've had next to zero very close to zero single digit, maybe 1 2% of evictions that would even get filed against a Section 8 tenant.

[00:10:09]And usually when you file that, they come up with the money cuz they don't want that on their record. They don't want to lose it.

[00:10:15]So, you have all these benefits actually with these Section 8 tenants.

[00:10:20]And, you know, the last thing is anybody can trash your house. We've already talked about that, but anybody can trash your crib. It is not about a program. It is about systems vetting.

[00:10:30]Here's a quick vetting tip that you should have to pay for that we drill down on in our course content in our mentorship program. How do you vet a tenant to know if they're going to be good, if they're going to take care of your house?

[00:10:46]You pop up on them. See where they're living now.

[00:10:49]A lot of Section 8 tenants are used to the government coming in the house, doing inspections.

[00:10:55]So, you just pop up before you move them into your house. Hey, we're just doing a quick property management inspection. We just need to pop up. Uh we're going to do a quick walk through your property.

[00:11:03]We'll be in and out in 5 minutes.

[00:11:06]Property management company requires this.

[00:11:09]They're usually like, "Cool." So, you pop up on them little to no notice, with their permission of course, and you see how they're living. If they're living clean, that's how they're going to take care of your house. If everything's trashed, that's how they're going to take care of your house.

[00:11:23]So, do those physical inspections.

[00:11:24]Protect yourself. Protect your assets, and you'll be successful. So, here's the reason why sophisticated investors choose programs like Section 8 and C-class markets like Philadelphia because the cash flow is absolutely insane.

[00:11:40]In these markets, they typically will pay you 20 to 30% more than they will pay for a market center. So, I can go into Philly and I can get a property and in Philly already has very high rents because New Yorkers get priced out of New York, move to Philly.

[00:11:55]And they drive up those rents. So, those rents are already high as market rents.

[00:11:58]But, when you go Section 8, they're going to give you an extra 20 to 30% of the rent as kind of a premium just to rent to their tenants because they have to incentivize a landlord somehow. Only 30% of landlords nationally accept Section 8 or understand the program well enough to do it. A lot of people think, "Oh, do you have to do some special qualification?" No. You just need a nice property. You can almost Section 8 any property. And a lot of people don't even know that. But, the cash flow is crazy.

[00:12:25]A 20 to 30% pop could be the difference between you seeing $200 per door in another market or in a A-class area versus $700 a month in cash flow even on a single-family property. How many of you would be out of the 9:00 to 5:00 right now if I could show you how to get 8 900 a month in cash flow.

[00:12:46]This is after expenses, after taxes, insurance, after property management, after capital expenditures, the sink broke, the toilet broke. If you could still get 8 900 a month even out of a single-family property, you'd be out of the 9:00 to 5:00 easily in 2 to 3 years if you focused in, if you got over your fear factor, and if you just proved it on one deal. It only takes one deal to get proof of concept and to build enough success to scale up to the next level. So, the cash flow is absolutely insane. I've never seen more cash flow out of any strategy or any program than you will see out of something like Section 8, veteran housing, some of these government based programs that we rock with in our program, the boots-on-the-ground program where we find finance rehab tenant and manage properties for you guys. So, let's get into the nitty-gritty on Section 8 cuz I want you guys to be successful with this program. And one of the things that people struggle with the most is the inspections. Section 8 requires you to pass a physical inspection of that property and have it up to a HUD housing standards, which means scraping paint, you know, no tripping hazards, and it's just generally habitable. They're not going to rent out some slum property.

[00:14:00]So, this is not a slum landlord program.

[00:14:02]If you're a slum landlord, keep doing your market rentals. Keep doing that thing. You don't want to be a part of this.

[00:14:07]You have to be a professional to be successful here, or you won't get paid.

[00:14:12]So, those inspections, you're going to have a pre-inspection before move-in, before they determine the rent and get you the money and all that stuff. They're going to do a pre-inspection to make sure the property is livable.

[00:14:24]And then they're going to do annual inspections of this property to make sure it's maintained. And that's just, like I said, basic habitability. Heat works, electric works, plumbing works. There's not chipped paint. There's not lead paint in the property. Everybody's safe. These are like basic inspections that are good for you, in my opinion, because it keeps the city coming in. It keeps the the Section 8 inspectors coming into the property. The tenants know it. So, everything has to be upkept pretty well. This is something I actually have to do the research to see, did they do this in the past? I'm not sure if they did these inspections in the '90s, or a lot of these houses wouldn't have gotten trashed the way they did. But yes, you must maintain these properties up to a basic livable level. And as long as you can do that, you're going to be successful. So, this means you must have a good property management team.

[00:15:17]You must have a team that has contractor relationships that can manage these properties for you because if you're thinking as the average bear, you're going to do it yourself, I've seen many people scale up doing it themselves, maybe five, 10 properties and still be working a 9-5 and have the kids and their aging parents and you know, their hobbies and all the things and at some point you get to a level where you just burn out because with 10 properties, something's going to be breaking here, something's going to be breaking there and I know you think you're Bob Vila or Property Brothers, you've been watching too much HGTV, but you will burn out.

[00:15:55]You need a professional company that has contractors, that has good pricing, that can manage these uh headaches for you and keep your properties on payroll. If you stay on payroll you will have so much cash flow and appreciation coming in off of these properties and tax losses that it will cover anything.

[00:16:13]It will cover 99% of what you're afraid of.

[00:16:18]Oh, this broke, that broke, the cash flow is going to eat through that, you're going to write it off on taxes.

[00:16:22]So, you're in this business for the long haul. Never forget that. A lot of us get into this game, we want to get rich quick, but we say, "Oh, I want to hold these properties for life." That doesn't make sense. That's what we would call a a catch-22. If you're in this game for the long term, then think long term, build long term, build durable assets, put good management in place and understand that long term appreciation matters, tax losses matter and rents go up with inflation. So, even if you're cash flowing 5, 600 a month right now off the government, if you go out 10 years, you're going to be cash flowing on the same properties 1,200 to 1,500 a month. How do I know? Cuz I've lived it.

[00:16:59]It's not guesswork anymore. It's not a hope, it's not a pipe dream and you can live it, but you got to get started. So, guys, this is the point in the real estate journey where you must choose who you want to be. Do you want to be the tortoise or the hare?

[00:17:12]Do you want to go slow and steady?

[00:17:14]Section 8 is the slow and steady strategy, the consistent cash flow, the 100% government checks coming in like clockwork that give you a base that allow you to scale to the next level.

[00:17:27]Or do you want to go for these fast strategies? I want a house flip. I want to do Airbnb. Oh, there's some new arbitrage.

[00:17:36]I can tell you those fast strategies burn out.

[00:17:40]They get government regulated out of cities. There's been cities that have completely banned Airbnb completely out of the city. Then what do those investors do? They go belly up.

[00:17:50]The bank takes it.

[00:17:51]They got to sell. They got to fire sale.

[00:17:54]So decide right now who you want to be and what you want to build because we all only have 24 hours in a day, 7 days in a week, on average 30 days in a month, and 12 months in a year. And you can count how many years you have left on the planet. Average life expectancy, let's say it's 78. So how many years you got left? So what you choose to build with your time is what you will have built when that time passes.

[00:18:24]And if you build some aggressive strategy with no guarantees, no guaranteed rent checks, no consistent income, you're going to crash out. It's a question of when.

[00:18:34]You will crash out. You are not the smartest who figured it out when nobody else could.

[00:18:41]I can guarantee you that ain't you, big dog.

[00:18:44]It's not. Been there, done that. A lot of people thought that. Before you even touched the planet, people were thinking that. Or are you going to build that slow and steady strategy that is like pushing the snowball, that little baby snowball up that hill.

[00:18:58]And as soon as you get to the top of it, you have a freaking boulder, and you just tap it and it flows downhill and gets bigger and bigger.

[00:19:07]Do you want to build that? If you want to build that, drop a comment that says Section 8, and I'll send you access to a free training that will teach you exactly how I got started step-by-step and what you need to do to get in the game no matter where you are in the country or even if you're outside of the country you want to invest in US real estate which is what a lot of our clients do as well.

[00:19:30]Drop that comment. Brian Grab your real estate mentor. Like, comment, subscribe.

[00:19:33]Share the content with someone who you want to get value. I'll see you guys on the next one.