Christian Osgood walks through a Section 8 rental strategy that raised rents from $450-$550 to $1,000 in Stephenville, Texas by using Fair Market Rent data and the Nan McKay handbook. Tenants pay nothing extra; the voucher program covers the increase. He claims the approach has generated millions across his portfolio.
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Today I'm gonna talk about a Section 8 strategy, a little hack that I have that has made us a ton of money, and I mean millions of dollars, by leasing our units in Section 8 around the country, Washington and Texas. I have a trick that is extremely helpful that I'm gonna show you here for free. So check it out, really excited to go through this. We're gonna be talking about the owner's handbook and the mods that I have made to this book that we use throughout our entire portfolio. This is a little quick masterclass. No, you don't have to pay $18,000 to some online guru to learn how to play Section 8. It's a simple strategy. I've done some things that I think are a little bit simple and unique, and you can copy them and use them in your strategy. So here we go. By the way, welcome to the channel. This is Multifamily Strategy. Like, subscribe if you like more of this content or want to learn more tips and tricks about how to master the real estate game. I started with $0 and using creative finance scaled from zero to hundreds of rental properties. Today I'm on a $30 million portfolio. Anyone can play this game we share here for free. By the way, if you want to take a deeper dive or you want coaching, that is available on multifamilystrategy.com. Without further ado, The Owner's Handbook. This is published by Nan McKay and Associates. It is The Owner's Handbook: A Guide to Housing Choice Voucher Program for Owners and Property Managers. Take a look here. This book can be found online, downloaded, and in almost any housing authority you can go physically and pick up a copy. It is a short little book that goes over a ton of things.. It gives you examples of the vouchers. It goes through— I'll show you some of the highlights here— responsibilities of the owners, benefits to owners and families, how you get involved, some of the laws, obligations of your tenants. If you want to understand the program, you pick up this book. One of my favorite pieces— I'm going to share 3 things, 2 of them modifications that I do— but one of the main things in this book is it has the renovation standards that you're going to need to qualify for your unit to be on a rental assistance program. Could be Section 8, could be any other housing program. But if you are working with any housing authority, this book has renovation standards that are absolutely fantastic. Are they a little over the top? I think so. But we use this as the renovation standard for our entire portfolio, which means whether it's a market rate tenant or it's Section 8. And by the way, I sit about 20% on government assisted programs and about 80% on market rate tenants. All of my units can be priced as Section 8. All of them can be made available for Section 8. It is a pricing guide that allows anyone into our rentals. With the maintenance in here, this set our guideline as owners for what do we need to renovate to, what things are important, how do we maximize for safety and for leaseability. If you copy this guide, if you are new to real estate, you are trying to come up with a renovation strategy that is going to qualify for all programs, all tenants, and maximize your tenant pool, just copy the guide in here and you have now set your renovation standards. Go through the checklist and you will actually get an inspection every time when they're going to place a tenant. You get really good at this really fast. My property management company recommends that you follow this to the letter. Now, for modifications every year, call the local housing authority. I usually do this around October, so several months before the start of the new year. They already know well in advance what their new numbers are going to be for the next year for housing voucher programs. So studios, 1 beds, 2 beds, 3 beds, and 4 beds are all going to have their own unique pricing known as FMR, or fair market value. I write it on the inside cover of the book. Now, the number that you see up here was for 2023, where studios were going for $785,000 and 1 beds for $860,000. Well, fast forward to 2024, studios are going for $874,000 and 1 beds are going for, what was that, $881. So only a $21 increase to one beds, which is pretty weak. Two beds, again, modest increases, nothing major. Um, they went from $1,075 to $1,108. But the big one in here, the really big one, studios went up almost $100. Just so happens I own a ton of studios. By being way ahead of this, I was also able to tailor my acquisition strategy and pick up more studios at the end of 2023. So when we hit 2024, we got automatic government-backed rental increases and we know that that is what they will pay for a standard studio. That is fair market rate. That's how they do their pricing. In addition, we set our pricing in our portfolio for entry-level housing to the housing guidelines, which means all people of all incomes can rent the space, but we know it qualifies for all available programs. It's a fantastic way to set in your pricing. And if you're trying to do market analysis, It's a really quick way to do this for entry-level housing. If your numbers work fantastically on the Section 8 pricing, their actual FMR, fair market value, if you look at that fair market rate and that makes your deal work, if you can just get it to the housing maximums, you're set. Uh, example, Stephenville, Texas. We bought a building that was rented for $450 to $550 per unit, and 10 of the 25 units were on Section 8. We called their Section 8 housing program, we asked them what fair market rate was, they gave us their pricing. It was almost $1,000 for one beds. I'm like, so why are we on $550? They're like, we've tried to explain this so many times to the prior owners that you just bought from, they would never raise it, and we don't know why because we pay the rent. On every renewal, I raised it to the Housing Maximum, and housing just paid it. The tenant never paid another dollar. Their cost stayed the same. Housing just paid me more because their lease was now more. That's it. That's what those programs are for. That allowed me to renovate the buildings faster, which gave me nicer housing for those tenants. And there's the trade there. We were able to finish all the renovations on these guidelines, make nicer units for our tenants, and in exchange, government programs gave us more money. It was literally the, This is not often in real estate, by the way, but it was actually literally free money. We made a phone call, we raised the rents, the government's paid for them. By the way, we pay a ton in property taxes. In a roundabout way, I just got a little tax rebate, right? Pay the government for all of your income and your rentals and your properties, and then you get a little bit of government support back when you do a good job managing your tenants and you actually do this. So write that right here inside the book. The last thing you're going to want to do is it different housing authorities will have different levels of help that they'll give you. Some will actually let you market on their sites, but we get recommendations from a lot of housing programs because they like us, because they've worked with us before. And when I pick up buildings, I usually get calls from them saying, hey, would you be willing to allocate a few units for one of our programs? They run a lot of individual programs for people that may be outside of Section 8, but your local housing authority does more than just Section 8 housing. I always write the names and numbers and contact information of my reps. Sometimes I even just glue a card in here. Uh, that is for our, uh, VA Affairs person. That is a contact that we had from Section 8. Using this book as my little Bible for how to run my properties has been super, super helpful for Section 8. Order this book again. It's the Owner's Handbook by Nan McKay. This thing is fantastic. It's super simple. And if you read this, you will know as much as almost anyone who goes through any of the super expensive mentorship programs online on how to run Section 8. There are no secrets in real estate. In fact, this book is extremely popular and you can pick it up or download it for free online. Hope this was helpful. If you appreciated this, it helps me grow the channel. If you give this a like and subscribe and push this channel forward, it's massively appreciated. If you have any questions, post in the comments. I do read every single comment and I will answer any questions you have. And You have a lingering question, show up to our lives on Wednesdays at 3 PM Pacific Standard Time. I'll answer your questions live on the channel. Till then, see you on the next episode.
