When it comes to investing in Chicago real estate, buyers have a lot of options. One area that many investors don’t pay enough attention to is Section 8 housing. There’s a bit of a stigma attached to housing programs among some rental property owners, but if you move past that, you’ll see that it’s actually a great way to earn some cash flow and some long term returns.
Section 8 is a voucher program that’s funded by the Department of Housing and Urban Development and administered by the Chicago Housing Authority. It helps people who can’t afford housing on their own. Today, we want to talk about the advantages of investing in Chicago’s Section 8 housing market.
Rent Payments are Consistent
Your Section 8 tenants are very 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.
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.
Well-Maintained Homes Are Not Optional
A lot of owners grumble about the inspection requirements of the Section 8 program. Yes, your property will have to pass an inspection before you’re permitted to rent it to tenants who receive vouchers. We see this as a benefit, however, because it means your rental home must remain in excellent condition. That’s good for your tenants and it’s also good for your increasing 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 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 Chicago, this is especially beneficial because you can lose a lot of money waiting to rent out an unoccupied property. 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 lease a Chicago rental property to Section 8 tenants, it doesn’t mean you’ll be earning less 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.
If you’d like help navigating the Section 8 program in Chicago, please contact us at Medallion Property Management.