investment property: Consider section 8!

I was recently working with a buyer looking to invest in some income property. Ideally, this buyer was looking to purchase 10 units this year–so I needed to quickly educate myself on all-things-rental to be his trusted advisor on the subject [insert me putting on my Steve Urkel glasses and nerd cape]. Did someone say reading? Learning something new? Ok I’ll just head down this deep, dark, rabbit hole of information on the internet and I’ll see you in a few years…

We toured several different properties in a few different towns, before we settled on the right one. I learned A TON along the way, but here are a few of the biggest learnings:

1. Location, location, location...but what does that MEAN?

Yes, location definitely matters when it comes to income properties! Home RENTERS want the best schools for their kids, just as much as home OWNERS do. But what does "Location" mean in NWI??? In our area, we get a lot of commuters into the city, South Bend, Indy, and Michigan. Consider a property that is close to the toll road, 94, or a major highway for ease of commute. The better location, the higher the rent, and the more bang you will get for your buck.

2. Consider Section 8…it has HUGE benefits!!!

Yowza, I learned SO MUCH about Section 8 during this process…and how AWESOME it can be for the owner. The government directly deposits money into the landlord/owner’s bank account at the beginning of each month! Rent backed by the local government?! Sign me up!

So to break it down, with Section 8, the subsidized portion goes into the owner’s bank account each month. No chasing anyone down for rent, or worrying about late payments. What’s more, the portion owed by the tenant has to be paid (and on time) in order for the tenant to continue to qualify for the program. Basically, the government is not only funding some of the rent, but also directly stands as an enforcer to the rent rules for you. Again…awesome!

A good amount of Section 8 renters tend to be older or potentially disabled. Which means that they do not want to move. You’ll have a lower turnover rate, which is key. The biggest expense when you’re a landlord is a vacant property so this is a great thing! Plus, since these are long-term renters, they really consider this their home–not just their house or apartment. So, they tend to take pride in it and take good care of it.

Here’s the tricky part…The home needs to be zoned/approved for Section 8, and so does the tenant. Plus, there are restrictions on how high you can raise the rent. However, if you’re looking at this as a long term investment (which you always should with income property), then the tortoise always wins the race.

3. It’s a Marathon, not a sprint

Remember, you’re in this for the long haul. This is not something you want to buy and then sell again in a year or two. Unless the market goes bananas, which is a whole different blog post lol :)

Yes, the monthly passive income is awesome, but it’s also an investment for your future self. There may be a property that is barely breaking even now, but in a few years once the mortgage is paid off or paid down & refinanced, you’ll have retirement income. The property will also appreciate over time, so when you’re ready to sell, you should see a pretty good profit as well.

Last thing I’ll say is that the “good ones” tend to get gobbled up the second that they hit the market. So, keep your eye out for when one becomes available and then hop on it. If you want to get set up on an auto-search in the background, just give me a shout.