In this conversation, Andre Smith discusses his experience as a property manager and the positive changes in the Section 8 housing program. Andre, of TNT Property Enterprises, started a property management and rehab company 13 years ago to help tenants find affordable housing. He highlights that Section 8 offers guaranteed income, attracting investors. Previously, Section 8 had a bad reputation due to problematic tenants, but MHA improved accountability and increased rent payments, especially during the pandemic. Screening tenants is the responsibility of landlords, and patience is needed due to inspection delays. Monthly inspections help maintain properties. Overall, the conversation highlights the benefits and challenges of the Section 8 program.
Jeff
0:00:43 – Welcome back to the It’s 5 O’Clock Somewhere Real Estate Investment Podcast. My name is Jeff McNett. I’m here with Matt Wheeler. And we’re here with Brett Bernard, our fearless leader and founder of the investment division at the Stamps Real Estate Company. Good morning, Brett. How are you? Hey, Jeff. Good morning. Just let you guys know, we’re just three guys talking about real estate, real casual, nothing scripted here. There’s not going to be any discussion of get rich quick in this real estate podcast because that just doesn’t exist. What we do basically is help investors all over the United States and different parts of the world build real estate investment portfolios right here in Memphis, Tennessee. If you’re interested in learning how to get started or if you’re a seasoned veteran that wants to diversify your portfolio, we are your guys. We also have Jerry. Jerry’s our newest agent in here. Good morning, Jerry. How are you today?
Jerry
0:01:33 – Good morning, Jeff.
Jeff
0:01:34 – Wonderful. Ready to make some money? Ready to help some people?
Jerry
0:01:38 – Yes, sir.
Jeff
0:01:39 – All right. Brett, before I introduce today’s guest, why don’t you tell us a little bit about our sponsor, Title Assurance and Escrow.
Brett
0:01:45 – Yeah, we are sponsored by Title Assurance and Escrow. They are a title company in Cordova, Tennessee. 8121 Walnut Run, Cordova, 38018.
Jeff
0:02:10 – All right. Thank you very much. This morning I am pleased to introduce Andre Smith. Good morning, Andre. How are you today?
Andre
0:02:17 – Good morning to you. Good morning to you, Mr. Jeff. How are you?
Jeff
0:02:19 – Man, we’re very good. We appreciate your time today. Andre is a placement and property manager for the Memphis Housing Authority. Andre, before I start bombarding you with too many questions, why don’t you tell us a little about yourself, the role you facilitate, and some of the great things that you guys are doing down at the Memphis Housing Authority.
Andre
0:02:36 – Just for correction, I don’t work for the Memphis Housing Authority, but I know a little bit about the process to find a Section 8 tenant.
Brett
0:02:43 – You’re actually TNT Property Management.
Andre
0:02:45 – I’m TNT Property Enterprises. So about 13 years ago, I started a property management company along with a rehab company, landscape company in order to place tenants in affordable housing. So Section 8 was one of the venues and avenues that we took on along with Catholic Charities, MIFA, CSA, any place we would get funding to actually help tenants find places. So Section 8 has actually been the very best because it is fully guaranteed money as long as the government stays operational.
Brett
0:03:18 – Fully guaranteed money has been a very attractive thing for investors over the years and, I don’t know if you’ll agree with this, but about 8 to 10 years ago and before Section 8 period was a complete disaster. A lot of investors just started pulling out of it and MHA as well as all the other Section 8 local government entities that were putting that money out there were having trouble finding decent homes for their tenants because the only things that were left were these shotgun houses in crack neighborhoods because no one wanted to rent the MHA tenants because. What were some of the problems they were having?
Andre
0:03:50 – Well, a lot of time investors don’t understand, especially out of town investors, they just see properties at a great price, but you really have to check the neighborhood out.
Brett
0:04:00 – More than just…
Andre
0:04:01 – Yes.
Brett
0:04:02 – More than just looking at. You need to go a couple of blocks.
Andre
0:04:03 – Right, you need to circle the block a few times and then a lot of times the investors don’t really understand how a tenant can literally damage your house that you’ve gotten ready and then section 8 when it comes time to re-inspect it, expect for you as the investor to put money back into it in order to fix it back up to continue that payment.
Brett
0:04:21 – For problems that were caused by the tenant.
Andre
0:04:24 – Problem caused by the tenant, absolutely perfectly stated, yes. So if you have enough bad tenants in your property, your property is torn up, I would leave too. Why am I dealing with that?
Brett
0:04:33 – So a majority of those investors pulled out. I was one of those. And so then now MHA as well as other Section 8 entities are having trouble finding houses. Because I can tell you right now, the experiences we’re having now with MHA and my investors is fantastic. Things are going really well. What changed and when did that change?
Andre
0:04:52 – Okay, Brett. So, we know that life is a cycle, right? So as they begin to move different investors out, you really go back and you take a look at your design. You say, well, this isn’t working, so let’s be more owner-friendly as opposed to tenant-friendly because Section 8 is not in the business of displacing tenants. So they came up with guidelines that if a tenant destroys your house, you can literally take them to court.
Andre
0:05:22 – And oftentimes, if you can present a viable case, that tenant may or may not have their voucher taken from them. So instead of saying, hey, here’s a voucher, go find a house, and whatever happens, happens. Now it’s, hey, look, go find a house, but you got to take care of this because you are getting subsidized for it.
Brett
0:05:40 – They brought accountability in for both sides instead of it always being a one-sided situation.
Andre
0:05:45 – Beautiful word, accountability. Yes.
Brett
0:05:47 – So, one thing I’m seeing right now is in Section 8, Memphis Housing Authority especially, is they’re actually paying slightly over market rent. So not only do you have a better qualified tenant from MHA, guaranteed income from MHA, but they’re actually exceeding what market rent dictates they should get for that house.
Andre
0:06:07 – Absolutely.
Brett
0:06:08 – And why are they doing that? To get better properties?
Andre
0:06:10 – To get better properties, but also, if you take a step back, during the pandemic, payments from Section 8 never stopped. So a lot of investors who had non-Section 8 tenants, their payments stopped during the pandemic, right?
Brett
0:06:23 – So even though there was a moratorium, Section 8 still continued to pay the rents.
Andre
0:06:29 – Every month, every month they paid consistently on time. So for those investors who only had Section 8 tenants, they may not have gotten their subsidized portion from the tenant, but the main portion from Section 8 they got, which was a beautiful thing. They got cash flow. Right, cash flow, whereas other investors, moratorium on evictions, you can’t do anything to them. They can sit in your house for as long as they want until it was lifted. And that lost a lot of investors’ money.
Brett
0:06:53 – Well, I guess you don’t have to worry about evictions because the MHA is paying the money.
Andre
0:06:57 – Absolutely right. But for those who did have Section 8 tenants, that was a huge thing around the country. So you didn’t have to worry about it. One of my investors has a 32-complex apartment, and we didn’t have one tenant because most of those tenants are veterans or subsidized. So every month, no issues. It’s hard to look at people that owe you money in your apartment complex as they drive by with new things.
Andre
0:07:19 – So, right. So for many investors, that section eight was absolutely a God-send because they didn’t have to worry about it being affected by the pandemic.
Brett
0:07:27 – I will say that one of the questions that I get a lot from investors when I bring up section eight, you could hear their hair stand up on the other end of the phone when you bring it up because they’ve all had experiences with Section 8. And it was the fact that the quality of the tenant was so bad. Literally, these guys were just getting out of seven-year stint in prison, getting an MHA voucher, and then moving into your house. Next thing you know, you’ve got a drug house. What’s MHA doing, if you know, to better screen these tenants? I know they don’t have perfect credit. Right. Right? I’ve got a Section 8 mother in one of the houses, and she’s got two kids, works two jobs. Right. Just doesn’t make enough money to make ends meet. Great lady, takes great care of the house. What are they doing to screen these tenants?
Andre
0:08:09 – So I don’t think that Section 8 is in the business of screening people that apply. It is actually up to the investor, the property management company, the person who’s actually going to be renting the house to do their due diligence. Right? Because all because somebody brings you a $2,000 voucher, that’s fantastic, but you have to go a little bit deeper and not really just chasing the voucher. So they’re not in the business of screening, that’s where professionals come in.
Brett
0:08:34 – Okay, is that something you do?
Andre
0:08:35 – Absolutely, absolutely right.
Brett
0:08:36 – So what’s the screening process?
Andre
0:08:38 – So it is simple. So when someone gives you a voucher, you also get their ID, you can go and take a look at their house and see where they’re living, see if the yard is cut, see if a lot of people are hanging out, see if you see anything that will cause you to be like, well, no, wait a minute. Now this property is torn up. Over here, all they’re going to do is do the same. They’re just going to transition from that property to my property. Talk to the landlord, their current landlord. You can find out information.
Brett
0:09:03 – You don’t want to offend anybody.
Andre
0:09:04 – Right. Check, you know, you can check their rental history. You can do a background check. All that information is there on the internet for you to do. So skip the voucher and think about as if you’re going to be letting someone rent your house without a voucher. Just treat it like that. The voucher is the plus.
Brett
0:09:21 – Yeah. Well, and unfortunately, a lot of the people who use Section 8 get lumped in with that very small percentage of bad people. So far, the investors that are using Section 8 that I have are having good success with it. The only drawback, and I’ll tell you what the drawback is. Once you submit the paperwork, then you got 30, maybe 45 days before MHA inspects and they won’t let the tenant move in until they inspect or if they inspect and there are issues that need to be repaired, that has to be done for them to come back and re-inspect. So there’s a much longer than a standard pay rent. But I told my last investor that it’s like going up a mountain, right? It’s kind of a pain in the ass going up that mountain, but as soon as you get to the top, man, it’s coaster all the way down along that tenant’s there. So if you can get through that first part of it, that’s something you help the investor do.
Andre
0:10:08 – Right. And that’s a good point, Brett. What a lot of investors want is an immediate return when somebody moves into their property. But Section 8, like the government, if you ever dealt with the government before, you know that it takes a little bit longer to pay, but you get your money though. Right. So it’s not only the inspection, but the first payment that you receive too could be up to 60 to 90 days before you get that payment. Now it’s retroactive, when the tenant moves in, but you know a lot of people don’t have time so it’s a patience thing and that’s what I tell all my investors up front. In order to get the glory you got to go through a little storm. So but once it’s received it’s fine but then within 10 months they’re gonna come out to re-inspect the property again and if the tenant does not turn in their recertification paperwork on time, there may be an abatement period. So you have to stay on top of those inspections and those time.
Brett
0:11:02 – And if you’re managing that property for an investor, that’s something you take care of.
Andre
0:11:07 – Something we take care of. Right. Doesn’t have to even think about it.
Brett
0:11:08 – Now, does this investor need to put any paperwork in with MHA? Do they give it to you or you deal with that?
Andre
0:11:15 – If we are going to be accepting the payment monthly, all I need is W-9 and ID to match. We’ll take care of the paperwork.
Brett
0:11:21 – Okay. I’ve got a self-managing investor out of Utah. He’s got a couple of MHAs and he went through this very lengthy packet of paperwork to get himself registered and all that, but he was able to rent all three of his houses that way.
Andre
0:11:35 – Right. And if I may add something, Brett, see, and lengthy are words that investors and people use because it takes time in order to fill out the paperwork and get your money. Sometimes you may be rejected in that, but it’s the patience part of it that comes into effect if you’re really going to be dealing with the government and getting subsidies from them.
Brett
0:11:53 – The government’s never done anything well.
Andre
0:11:55 – So as long as you remember that, right, as long as you remember that, you know it’s going to be.
Brett
0:12:00 – Again, I’ve gone through this now 15 times with investors. I’ve learned a lot about the MHA program and the process and what has to take place, and I learned the hard way in a few of them. But I will say that once you get to the top of that mountain, it is easy coasting after that because the money just comes in every month. You’re getting paid. Hopefully, the management company or the property manager qualified that tenant enough so it’s not getting torn up and they’re taking care of the property.
Andre
0:12:25 – And you can also do monthly inspections on any property, whether it’s a Section 8 or non-Section 8 tenant. And you should treat it like new relationships. Let me see you once a month. And I’ll just give you a time to walk through the house to see if the doorknobs are hanging up, the ceiling fan is down or anything. If you catch it on the front end, you can correct it. But you can’t just hide your head, get the money, and then 12 months later, it holes in the walls.
Brett
0:12:48 – Well, I can tell you there’s, whether it’s self-pay or Section 8, you know, some tenants just don’t take care of property, right? They don’t care to cut the grass. They don’t care if the weeds are growing up through the windows. They just, it doesn’t matter. But that’s part of investing because we talk a lot about investment strategies. I’m from the school of building asset wealth and quit trying to become a millionaire overnight with cash flow on rental property. That’s not going to happen. In that sense, minimal things like that are not that important as long as you don’t let them get out of hand.
Andre
0:13:17 – Absolutely right. Absolutely right.
Brett
0:13:18 – All right, Andre. Well, I appreciate you coming in, man. I really do. I look forward to working with you a lot more in the future. We’ve got a few deals working now that we need to get together about and talk about. So that’ll wrap up this episode of It’s 5 O’Clock Somewhere Real Estate Podcast. We’re not experts, we actually know what we’re talking about.
Related reading:
Learn more about the Memphis Housing Authority Section 8 Voucher program.