I Made Over $1.5 Million In One Year (Using the Section 8 Stack)

On today's video, I'm going to show you exactly how I have made over $1 million, actually almost $2 million in one shot in one year using a strategy called the Section 8 Stack. This is an advanced Section 8 strategy that is so simple to use and so many people miss it. I have seen Section 8 courses and strategies online with people touting, hey, buy hundreds of these crappy houses in the middle of nowhere and put them on Section 8. You're going to make a bunch of money. This is unbelievably easier. You can do it in just a few transactions and can literally make you millions of dollars. In fact, stay tuned. At the end of the video, I'm going to go to the whiteboard and actually show you the exact math on exactly how I made the money. I'll show you over $1.7 million in money that I made in one year and the math that the bank used to give me the cash-out refinance. So if you're looking for your first 7 figures or looking to make your next 7 figures, you can do it following the Section 8 Stack Strategy I'm going to share right now on today's video. So, so first of all, I want to dispel this common myth. Buy these single-family houses in the middle of nowhere. There are like 7 or 8 course sellers that all they focus on is crappy houses, middle of nowhere. Buy these things. It's tons of work. They're always in the field at houses evicting people. It's a nightmare. And if you buy crappy properties, guess what your whole business is built on? Crappy buildings. You're going to have old buildings. You're going to have problems. You're going to have problem tenants. It's going to be an endless management nightmare. And it's not that fun of a business to be in. Like there's a bunch of other jobs you can do to make the same amount of money. In the Section 8 stack, we're using multifamily for what it was made to do. House multiple people. I have properties where 70% of the building is Section 8. The government sends me a check for 80, 90, in some cases 100% of their rent. This voucher program that is extremely common, all it is essentially people who make low income can apply for a housing voucher. When they get accepted, you can place them in your apartments. Now we still screen them the exact same way that you would any other tenant. So they get the same background checks, the same credit checks. The only difference is they're They're paying a lot less rent. It's much easier for them to afford. I have properties where I get $50,000 to $70,000 checks every single month from the government before all the other rent comes in. I get one single check, any better than a check. It's a direct deposit. It just, it's my account. It's never late. It's government guaranteed. This is a strategy that you can copy into your business and it will be absolutely amazing. In the background here, you're seeing a property that I recently purchased. Now, about 40% of the tenants here are on Section 8. This is a 144-unit building. Look at the quality of the buildings though. These are beautiful brick buildings. It's built in 2006. There's a pool, a clubhouse, a basketball court, an in-office gym, computer lab. There's all sorts of amenities and awesome tenants here. A ton of them happen to be lower income. This is a desperately needed asset class, especially right now where economics are a little bit hard. And I think it's going to be harder to be a renter over the next few years as opposed to easier. In our current economic climate, we have a lot of volatility. I think low-income housing is going to be in increasing demand. It's still expensive to build. There's not a whole lot of new inventory being built. Housing's really hard. So affordable housing is extremely important. So what do you hold when you buy multifamily instead of buying these crappy houses in the middle of nowhere? You hold these beautiful buildings like this 144-unit, like my 76-unit, like the 44-unit. I have a senior housing community. A whole bunch of these seniors are on fixed income. We provide beautiful housing for fantastic people and we're able to offer this to, and we're able to offer this affordable housing because of the government subsidy programs. This is what taxes go for. But when you stack them, instead of buying this one house, buying a single building with multiple Section 8 tenants as a portion of your mix, you're getting sec— you're getting the most out of Section 8, and that's what you're really looking for. So what I'm going to do now is I'm going to cut to the whiteboard. I'm going to show you what the math looks like on this. There was a year where Section 8 in my market went up $91 on average between the 1 beds, 2 beds, 3 beds. It's calculated off something called fair market rent, or FMR. That is the maximum Section 8 will pay for a tenant. If you can buy deals where you, in your underwriting, you just determine, hey, does the deal work if I only get this to today's FMR? If you can price to FMR, which I've done on many, many, many properties, and you can lease up the property there, you mark it as Section 8 available. I want Section 8 to apply. Now we'll still bring in some market rate tenants. Everyone's welcome to apply. But what ends up happening is a large portion of my tenants actually do have those Section 8 vouchers because we market specifically for it. The verbiage in our listings also has Section 8 encouraged or Section 8 available. We price to match this, so we stack the deck in our favor towards getting applicants who are on the Section 8 program. As a result, in my 550-unit portfolio, I had 98 multifamily rentals and a $91 average increase in FMR. This means the government paid an extra $91 per month every single month for almost 100 tenants. Here's what the numbers look like.

This is where the math gets crazy. I'm so excited to show you this. So over the past few years, I usually buy 3 or 4 deals a year. So as I'm doing transactions over about a 5-year period, I've accumulated over 500 rental units. We recently closed on 144. I bought a 76, a 44. In fact, these are the buildings that you're seeing in the background earlier in this video. Beautiful buildings, brick buildings. In Stephenville, we bought a 25, a 26. I have a 10-plex in Houston. I have another 100-something units in Washington State, and so on. We bought these buildings, and it actually doesn't take that long to make all of this happen. So we went through all of this, we keep stacking rentals and rentals and rentals, and now you have this beautiful portfolio, and about 20% of it is on Section 8. So what we ended up with is one year we had an average increase between 1 beds, 2 beds, and 3 beds of $91 per unit. Now this is over 98 units, so $91 per month, 98 different units. Here's where the math gets crazy. In residential real estate, your valuation is based on whatever your neighbors just sold for. In commercial, it's based on your net operating income. How much do your expenses go up if the government pays an additional $91 per unit?

Nothing.

My utilities are the same, my mortgage is the same, my taxes are the same. Nothing went up because the government's paying me more money. However, I'm getting $91 times 98 per month automatically, doing no additional work. So let's break out the math. $91 times 98 units, we are making an extra almost $9,000 a month. Now, one of the crazy things is a lot of people have an initial goal of setting up a $10,000 a month income. This gets you almost all the way there automatically in one shot. Now, on these 91 units, all returns are evaluated annually. So our new net operating income has gone up times 12. $100,000 a year, actually $107,000 a year. Now, in our markets at the time, both in Washington State and in Texas, we were seeing an average of about a 7 cap for valuation. It's gotten a little higher. Initially when I started, it was closer to a 6. But all you do to figure out how much this is worth to a bank, and this is what it was actually worth to the bank, We divide this by the cap rate, the return that one would expect in that market, in this case a 7%. So divide by 0.07. That is what it's worth to me today. At the time of my cash-out refinance, it was $91 times 98 times 12. $1.7 million divided by 0.06. That is the valuation that the bank gave me at the time that I did this. So in those market conditions, I made $1.7 million. In today's market, if I had the exact same thing happen the exact same way, we would make $1.5 million. This is why I love commercial real estate. Even when the cap rates move up and down, your valuations are based on performance. This is why it's called the Section 8 stack. It's not just a single dumpy house in the middle of nowhere. These are beautiful buildings. They're based on their performance, and the math is super easy to do. How much new income are we creating annually, and how much is that income worth? In this case, 7 figures. I've owned these for years. This happens every once in a while. Now, sometimes the revenue only goes up $20. Some years it goes up over $100. It's based on fair market rent. So if you're buying in growing markets in excellent areas Here's what you end up with. You end up with beautiful properties, lots of units, very high cash flow, high values, and a very large net worth built on beautiful buildings and a large amount of them in growing areas. So you can skip these Section 8 strategies of like, hey, let's buy in middle of nowhere Midwest. I'm not trying to buy in Gary, Indiana. I don't want to buy in the— sorry if you happen to invest in Gary. I'm not trying to buy in the worst areas or the dumpiest areas. I'm not trying to go affordable. I'm buying the properties that I want to own, I'm getting paid to do so, and we're doing this again and again and again. Section 8 is helping us create massive checks, get government money, have tenants who need the help get the help they need, and our screening processes look the same as they do for any other tenant. This is a simple method. This is the Section 8 stack. Do this in multifamily, not single family, and you will literally make millions of dollars on repeat without doing any additional If you want more coaching on exactly how to do this, check out multifamilystrategy.com for our mentorship group. You can actually book a call with my team and see if this is something that you want to get involved in. If you want direct coaching and be in a community where people are buying deals like this all the time, all around the country, starting with little to no money like I did, you can do the exact same thing there. Again, go to multifamilystrategy.com, and I'll see you on the next episode.