Christian Osgood generates over $100,000 a month in guaranteed rent through Section 8 in Texas by buying quality 76-144 unit properties that meet HUD standards, not cheap fixups. Fair Market Rent has risen 6-7% in his markets while he underwritten only 2%, so the government pays more than the lease amount mid-lease.
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All right, there we go. We are live. Intro music apparently is not going to play today, but that is fine. We can, uh, we can survive without it. Hello and welcome to Multifamily Strategy. I'm Christian Osgood, your channel host. Uh, today talking about one of my favorite and most lucrative strategies, and no, it's not buy crappy houses in the middle of nowhere, uh, but it is Section 8. In fact, uh, right now in Abilene, Texas, we receive about $75,000 a month from Section 8 alone. In Stephenville, Texas, it's another $30-something. Washington State, it's a whole bunch. Uh, but over $100,000 a month comes in directly from the government on Section 8. I'm going to talk about that strategy and why it made us way more money this year than it was supposed to. So, um, excited to break into it. Uh, everyone, welcome to the channel. Oh, by the way, link is below, but this is our, uh, first live since the book has dropped. So the book on creative real estate, the actual deals and examples that I put together, um, the book is out. It's It's on Amazon. The link is below. You guys check it out in the description. Uh, but today's topic is not about that. It's about Section 8 strategy and how you can make a boatload of money, uh, using this correctly. So what is the goal of Section 8 in general? It's to provide housing to those who need it, who make a little bit less. Uh, it is not to get junkie tenants into junkie buildings. It's not to allow slumlords to take over the slums of Memphis, Tennessee, or Gary, Indiana. Uh, and I've seen a billion courses on this, on like pick up these beat-up crappy houses, make them barely habitable, and get the government to let you put people in it. And then you hear all these horror stories. Everyone who believes that that is a viable method is completely wrong. You don't want to buy crappy assets. Who wants to have a portfolio of junk houses? If you think about it critically for 2 seconds, it's a losing strategy. Uh, and I think most of the people who've made a lot of money on the Section 8 strategy are selling a crappy course on Section 8. And since AI's come up, it's pretty much killed all those courses. Thank goodness. Section 8 used correctly provide the most housing to the most people who need it. Buy nice buildings in great areas and buy them at prices where Section 8 rent works. Um, so I have a bunch of deals that are LIHTC. I also have a lot of market rate deals that are for entry level or workforce force housing. The renovation standard is still high. We have nice cabinets, nice floors, nice heating, uniform paint. I use the same toilets, shower heads, faucets in my Class B+ units as I do my C- units. Uniform, nice, clean places to live. Uniform being the key because you always want to be in compliance for what Section 8 wants. But if you optimize for Section 8 and you buy deals where you go, hey, if we get Section 8 rent with a post online publicly, you can Google FMR, fair market rent, in my area. It's either going to be by county or in larger cities by city. You can check FMR in your area and go, hey, this is what rent will be. I'm going to go ahead and lease this building and offer it at this. If your numbers work there, it's a great way to benchmark. This is how I'm going to buy this deal. In my properties, because I bought a lot of light tech, which is already rent capped, we bought it at a price where it just works and they cash flow beautifully. On my market rate or workforce housing, the entry-level housing that's perfect for Section 8, they're beautiful buildings, they're well maintained, they're in awesome markets like Stephenville and Abilene. And, and we have one in Houston, Texas. We have great markets, great locations, great quality of property, but they're all uniform, they're fairly basic, and they check every single box for Section 8. And as a result, we get a ton of Section 8 tenants. We We screen them the same way as any other tenant. They have to pass on credit score, no evictions, criminal background. We have normal people who just happen to make a little bit less. We're not reducing our standard of living there except specifically the income. They're qualifying based on the amount that they have to pay. Every other qualification stays one for one exactly in place as any other tenant. So as a result, I have great tenants who happen to have less income. And the government pays us over $100,000 a month to own beautiful buildings that appreciate like crazy in great spots. But that's not why Texas is making so much money. The markets I invested in Texas also are areas that have very consistent population growth. We buy based on cash flow, stacking the deck as aggressively as we can for appreciation. This is why that classic Section 8 buy crappy houses in the Midwest— buy them where they cash flow, build an income, Uh, they never appreciate. You don't make the big money. You get a little bit of cash flow for buying a crappy property. In my model, in the model that our company has adopted, we buy these beautiful big buildings. We're talking 76 units, 144 units, little 10-plex in Houston. But you're buying nice properties, nice areas, bigger buildings, and you open them up to Section 8. And then a lot of these, more than 50% of the rent comes in from the government on an auto-drafted check every single month of the at the same time. And the tenants are awesome, and we renew them all the time. But that strategy allows me to keep occupancy very, very high, my tenants to actually pay less in rent. You end up with full buildings, and FMR keeps going up. When population goes up and job growth is going up, when you've already stacked your deck towards appreciation, a magic thing happens— average area income goes up. And as a result, fair market rent goes up. It's evaluated on a historical 2-year average. So take Stephenville, Texas, for example. FMR went up about 7%. I underwrote all of our deals for an average of a 2% increase. Our tenants are not paying any extra money. The government is just paying a 7%. In Abilene, it gets even better. It increased by about 6.5%. So about the same as Stephenville. But Abilene, the way that they process their, uh, their checks, they mid-lease they said, hey, FMR is higher, we're gonna start paying more. I have actual leases in Abilene where the city is paying me— if the local housing authority is paying me more than the lease amount, like, that's just how we process. Tell me any other strategy, any other asset class where your tenant reaches out mid-lease and says, hey, I'm informing you that I'm now paying more than my lease amount, you're gonna have to figure out what to do with the excess money. I've never had that problem before, and I'm willing to bet most landlords have never had that problem before. I've only seen it in Section 8. You only do it in these great areas, but Texas has been such a— not every market in Texas, but most markets in Texas have done so well. All you're doing with the correct Section 8 strategy, and you can copy this one for one, buy bigger deals that work on the Section 8 FMR in areas where there's consistent job growth, population growth. If you're doing that, uh, there's really not many areas in the company— there's a country— there's a few, but there's not many where they're actually overbuilding by a whole lot. And so what you're going to see is you're going to stay supply constrained. Incomes go up, supply gets more and more constrained as more people— more and more people move in. This pushes rent up, it pushes fair market rent up. You end up just making a lot more money. This strategy has worked for me fantastically in my portfolio. It will work for you as well. I wanted to share that here on today's live. Now, if you want to apply these strategies in your own portfolio, uh, by all means copy and paste the exact same thing. Uh, look up FMR in your area, fair market rent. Make sure that in your specific market that the buildings that are looking for that rent are actually getting it, because sometimes it's housing Authorities will negotiate, sometimes they won't. But you're trying to buy bigger properties in higher appreciation areas where FMR works for your deal. If you do this, you want as much Section 8 as possible. It maximizes your guaranteed rent. It is a fantastic, fantastic strategy I've used a bunch of times and wanted to give it to you guys here. Now again, uh, you can learn more how to buy those deals in the book here, the book on creative real estate right behind me. I'm also going to be running a 90-minute webinar tonight, so if you want to register for that, in the description there's also a link that. It's multifamilystrategy.com/workshop. Uh, but I'm gonna be running 90 minutes on exactly how to structure the deal, the debt, the equity, even get paid along the way. If you have never attended that, I've run about 100 different versions of this over the last 3 years. I've gotten pretty darn good at teaching this. I tweak it a little bit every time. Uh, but I haven't run a webinar in a minute. I'm really excited to offer this one to you. So if you guys wanna check that out, uh, link is below. Um, that will be at the top of the hour. Other than that, I will see you guys all on the next episode.
