Christian Osgood scaled a multi-hundred-unit portfolio using Section 8 vouchers, but a Washington county housing authority repeatedly delayed payments 30-100+ days and issued IOUs instead of checks. He stopped accepting Section 8 there, but says the problem was the local authority, not the tenants, and offers landlords a checklist for vetting housing authorities.
Chapters
Section 8 is a fantastic strategy. I've used it a ton in my multi-hundred-unit portfolio. I built it from $0 from scratch, and Section 8 has really helped me scale up my portfolio and build it to what it is today. I found financial freedom in these strategies, but there's a fatal flaw that I have run into that's happened a few times. I'm going to share the story. It may not be what you think. If you're new to Section 8, you're new to creative finance, this is a video worth watching. By the way, my name is Christian Osgood. I bought hundreds of rentals starting with $0 because that was in fact the budget. Over the past several years, we've scaled up the portfolio in Washington State and Texas in several markets in each of those states and had tremendous success utilizing Section 8 in multifamily buildings to provide excellent housing to excellent people. Here is an issue that I ran into though. In Washington State, in one specific county, they've, they honestly, they ran out of money. They let us know, hey, we're going to start paying you in promissory notes. Apparently there is actually a law in place that says that we must accept these promises to pay from the government. They're interest-free, and for up to 30 days, they can actually move a tenant in and not pay. They literally can place tenants with an IOU from the government. Here's the issue. They haven't been paying in the first 30 days. They place a human being in my buildings. They don't pay anything. They're allowed to do this because of stupid laws. They come in, put someone in the building. The tenants typically pay— it's usually somewhere around 20% of the total rent. The government comes in and pays the rest. Tenants start paying their piece. However, housing authority goes delinquent. We reach out, oh yeah, we'll send it in the mail. They don't send it in the mail. They go delinquent a second month. Now they're way past their IOU. We still don't have money. They're claiming, oh no, we mailed it. They never mailed it. 3 weeks later, we call housing authority. Hey, we're going to have to proceed with evicting a tenant who is paying their portion because you have not paid. We have to essentially evict the person because you can't evict housing authority. They're not the one on the lease. It's the tenant. However, the rent has not been paid. Our only recourse is to remove the tenant. Then they send a check and turns out, oh, actually we just got it mailed out. It went to the wrong company name. We need you guys to fill out some paperwork. You have the paperwork. In fact, we've sent it 3 times. Well, let's call a meeting about this. One Zoom call later. Now we're talking about a deal that we're over 100 days delinquent on receiving rent from the government. They get back to us and go, oh yeah, no, sorry, that's our bad. We're going to go ahead and mail the check. At this point we say, no, just do direct deposit, please get it into our account. They inform us, hey, we can only do this with mail. They say they mail it out. Lo and behold, it doesn't arrive again. We had to hire a lawyer. We had to serve notice to the poor tenant who was a fantastic human being, as most of our Section 8 tenants are. Virtually all of them have been excellent to work with. If you didn't know, by the way, you can screen Section 8 tenants exactly the same as you could screen anyone else. It's a very simple process. You tend to get very great Section 8 tenants. If you are a good landlord and you know how to screen, you get great people in your buildings. I had this poor lady who needed help, who needed the housing, who we tried and tried and tried and tried and tried to work with. We were forced to serve her with a pay or vacate. At this time, magically, the next day, housing authority found the money and gave us a check. To me, this is the worst thing that can happen in housing. You have people who need housing, you have a market that needs it, you have landlords who have renovated spaces, and I really do spend a lot of time creating excellent spaces for the people. We have someone move in and they are paying their portion, and the government's guaranteed check is not coming in due to local incompetence and nothing else. This strategy works in every single county. However, if you're working with incompetent people, which you tend to get in the government— this has actually been a legitimate problem for me, has been a problem long enough with enough tenants with a similar story— where in this specific county in Washington State, I will no longer be attempting to service Section 8 housing. It is needed I feel bad. I really do want to fight homelessness and be an excellent landlord. I love a mission of let's end slumlords. Let's come in, buy their properties, fix them up right, get the right people in there in excellently run properties. I think this is an amazing service. It has become unfeasible. We lose money while we just bleed money waiting for the government to actually pay their guaranteed amount. And they're trying to pass off these IOUs that they have no intention of paying anywhere this quarter. It is unbelievable. It is a huge bummer, but I do want to say this. We're not having problems with the tenants. The tenants are paying their portion. They are great people. In fact, I have almost 100 tenants on Section 8. It is a huge, huge portion of our portfolio. If it's a strategy that you want to pursue, I highly encourage you to do so. Make sure you talk to other landlords in your area to know what it's like to work with housing. The other thing that you're going to look for is how many vouchers they have available right now. If everyone's placed, there's probably not a huge need for this strategy. You also want to ask how many vouchers expired last year. If they are failing to place people who make it onto the Section 8 program, that typically means that there's a huge need and you are providing both a needed service to your community and supply and demand. When you're supplying a needed service, there's often a lot of money you can make in the strategy. Make sure that the housing authority will actually work with you. Sometimes you just get bad actors in a local government until they replace personnel. I'm out in one certain county in Washington State. By the way, if you found this video helpful, please like and subscribe. If you guys want a free course, absolutely free on how to buy these properties with or without money, click the link in the below description for the free mini course. It's about 16 minutes. It goes through the exact strategy that you need to follow if you want to do the same thing.
