Investing in Section 8 housing can be an excellent strategy for some investors. After all, low-income housing is essential for several reasons, and several families and individuals can benefit from more available affordable housing units. In the video below, we’ll go over the basics of low-income housing, including tenant-based and project-based assistance, and how to invest in Maryland Section 8 housing.
Contents of This Article:
- What Is Section 8 Housing?
- Why Is Section 8 Housing Important?
- How to Invest in Maryland Section 8 Housing
- Pros and Cons of Investing in Section 8
- Manage Your Investment With BMG
What Is Section 8 Housing?
Section 8 housing, also known as the Housing Choice Voucher Program, is a federal program developed by the Department of Housing and Urban Development (HUD). The program aims to provide safe and affordable housing to low-income, disabled, and elderly individuals.
That said, there are two different types of housing assistance provided by the Section 8 program. For instance, there are voucher-based assistance and project-based assistance. The difference is that tenants with voucher-based assistance can choose where they live, while project-based vouchers are attached to a specific unit or building.
If you’re thinking about investing in low-income housing, or if you’re a rental property manager in Baltimore, it’s important to know who qualifies, why it’s important, and how to invest in project-based Section 8 units.
Who Qualifies for Section 8 Housing?
To qualify for Section 8 housing in Maryland, households must meet certain eligibility criteria set by the U.S. Department of Housing and Urban Development (HUD). Here are some of the Section 8 requirements and criteria for residents in Maryland.
- Income Limits- Households must have income below a certain threshold. That said, the income limits vary depending on household size and location of the housing unit. Limits are set by the Maryland Housing and Community Development (DHCD).
- Citizenship or Immigration Status- At least one household member must be a U.S. citizen or have eligible immigration status.
- Background Check- Adult members of each household must undergo a criminal background check. They may be disqualified for certain criminal convictions.
- Rental History- Section 8 applicants must have a good rental history with no evictions or outstanding debts on their report.
- Other Requirements- Individuals or families applying for Section 8 must meet other eligibility criteria, like housing needs or family composition.
Why Is Section 8 Housing Important?
With the rising cost of living, many families struggle to make ends meet. Additionally, finding affordable housing can be extremely difficult for some. As such, Section 8 housing is an essential resource for low-income families in Maryland. Here are some of the main reasons why Section 8 housing is essential.
- Access to Affordable Housing- Section 8 housing gives low-income individuals and families access to safe and affordable housing.
- Reducing Homelessness- Section 8 vouchers and housing units prevent homelessness by offering a subsidy that makes housing more affordable for those who might otherwise struggle to find and maintain stable housing.
- Improving Quality of Life- Access to stable housing can lead to improved mental and physical health, better educational outcomes for children, and increased opportunities for personal and professional growth.
How to Invest in Maryland Section 8 Housing
If you’re thinking about investing in Section 8 housing in Maryland, there are certain steps you’ll want to take to ensure a successful investment. Additionally, there are a few different ways to provide Section 8 housing to those who qualify, whether it’s project-based or tenant-based.
Investing in project-based Section 8 housing involves buying small or large multi-family housing units in areas that need low-income housing. It may help to work with realtors who specialize in Section 8 to help you find properties that work best.
Then, you’ll want to work with the local public housing authority (PHA) to get approved to participate in Section 8. As part of the application process, you must submit details about yourself and the property.
Next, Section 8 housing requires regular inspections to check for hazards like lead-based paint, structural issues, etc. If your property doesn’t meet these qualifications, you must make the necessary repairs before applying with your local PHA.
When you pass the property inspection, come up with a tenant selection plan and make it public to find your first tenants. That said, finding qualified tenants shouldn’t be too difficult, depending on where your Section 8 property is located. Additionally, investors should be ready to handle the property management responsibilities of investing in Section 8 housing.
Pros and Cons of Investing in Section 8
Some investors shy away from investing in Section 8 housing, and there are several reasons for that. After all, it has a number of risks, including rental pricing regulations, difficulty evicting problem tenants, a potentially higher likelihood of property damage, and difficulty selling properties to the free market. However, investing in Section 8 also has many benefits, especially if you have a skilled property management team by your side. Let’s look at some of the pros and cons of investing in Section 8 housing in Maryland.
Benefits of Investing in Section 8
- Lower Vacancy Rates- There’s typically high demand for Section 8 housing, leading to lower vacancy rates than market-rate rental properties. Additionally, Section 8 leases typically have longer terms, providing more stability for the landlord.
- Pre-Screened Tenants- Another benefit of Section 8 housing for investors is that tenants are already pre-screened. This doesn’t mean you should forego your own screening process altogether. However, in order to qualify for a housing voucher, tenants must meet certain requirements. Additionally, if you invest in project-based Section 8, you may have to vet tenants yourself.
- Guaranteed Rent Payments- The government provides a portion of the rent directly to the landlord, offering a reliable and steady source of income. This can reduce the risk of non-payment or late payments.
Disadvantages of Section 8 Investments
- Regulatory Requirements- Landlords must comply with specific regulations the housing authority sets. Some of these may include regular property inspections and certain maintenance standards.
- Limited Rent Increases- Rent increases may be subject to certain restrictions set by the housing authority, which can limit potential profit margins.
- Potential for Delayed Payments- While rent is generally reliable, there may be occasional delays in payments due to administrative processes or issues with the housing authority.
Manage Your Investment With BMG
If you’re looking at investing in Section 8 housing in Maryland, you’ll want to consider the pros and cons. Additionally, think about how you’ll manage your investment. For instance, if you’re investing in multiple units, like an apartment complex, managing all of them by yourself can be quite difficult. As such, you’ll want to consider hiring full-service property management to help you stay ahead.
Need More Advice? contact us today!
Bay Property Management Group offers comprehensive rental management services throughout Baltimore, Philadelphia, Northern Virginia, and Washington, DC. We can help with the entire rental process, whether it’s tenant screening, signing leases, maintaining properties, and more. So, if you have multiple rental units and need help managing them all, contact BMG today!