The Section 8 Stack: How a $91 Rent Bump Made $1.7 Million

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0:00 On today's video, I'm going to show you
0:01 exactly how I have made over a million
0:04 dollars, actually almost $2 million in
0:06 one shot in one year using a strategy
0:09 called the Section 8 stack. This is a
0:11 advanced section 8 strategy that is so
0:13 simple to use and so many people miss
0:15 it. I have seen section 8 courses and
0:17 strategies online with people touting,
0:19 "Hey, buy hundreds of these crappy
0:21 houses in the middle of nowhere and put
0:23 them on section 8. You're going to make
0:24 a bunch of money." This is unbelievably
0:26 easier. You can do it in just a few
0:29 transactions and can literally make you
0:31 millions of dollars. In fact, stay tuned
0:33 at the end of the video. I'm going to go
0:34 through the whiteboard and actually show
0:35 you the exact math on exactly how I made
0:38 the money. I'll show you over a million7
0:40 in money that I made in one year and the
0:43 math that the bank used to give me the
0:46 cash out refinance. So, if you're
0:48 looking for your first seven figures or
0:50 looking to make your next seven figures,
0:52 you can do it following the section 8
0:54 stack strategy I'm going to share right
0:55 now on today's video. So,
0:58 [music]
1:05 [music]
1:10 [music]
1:11 so first of all, I want to dispel this
1:13 common myth. Buy these single family
1:15 houses in the middle of nowhere. There
1:17 are like seven or eight core sellers
1:18 that all they focus on is crappy houses
1:21 middle of nowhere. Buy these things.
1:22 It's tons of work. They're always in the
1:24 field at houses evicting people. It's a
1:27 nightmare. And if you buy crappy
1:29 properties, guess what? Your whole
1:30 business is built on crappy buildings.
1:33 You're going to have old buildings.
1:34 You're going to have problems. You're
1:35 going to have problem tenants. It's
1:37 going to be an endless management
1:39 nightmare. And it's not that fun of a
1:41 business to be in. Like there's a bunch
1:42 of other jobs you can do to make the
1:43 same amount of money. In the section 8
1:46 stack, we're using multif family photo
1:47 was made to do house multiple people. I
1:50 have properties where 70% of the
1:53 building is section 8. The government
1:57 sends me a check for 80 90 in some cases
2:01 100% of their rent. This voucher program
2:04 that is extremely common. All it is is
2:06 essentially people who make low income
2:08 can apply for a housing voucher. When
2:10 they get accepted, you can place them in
2:12 your apartments. Now, we still screen
2:14 them the exact same way that you would
2:16 any other tenant. So, they get the same
2:17 background checks, the same credit
2:18 checks. The only difference is they're
2:20 paying a lot less rent. It's much easier
2:23 for them to afford. I have properties
2:25 where I get 50 to $70,000 checks every
2:29 single month from the government before
2:32 all the other rent comes in. I get one
2:34 single check. I mean, better than a
2:36 check, it's a direct deposit. It just
2:37 it's my account. It's never late. It's
2:40 government guaranteed. This is a
2:42 strategy that you can copy into your
2:43 business and it will be absolutely
2:45 amazing. In the background here, you're
2:48 seeing a property that I recently
2:49 purchased. Now, about 40% of the tenants
2:52 here are on section 8. This is a 144
2:54 unit building. Look at the quality of
2:56 the buildings, though. These are
2:57 beautiful brick buildings. It's built in
2:59 2006.
3:01 There's a pool, a clubhouse, a
3:02 basketball court, an inoff gym, computer
3:05 lab. There's all sorts of amenities and
3:07 awesome tenants here. A ton of them
3:09 happen to be lower income. This is a
3:12 desperately needed asset class,
3:14 especially right now where economics are
3:16 a little bit hard. And I think it's
3:18 going to be harder to be a renter over
3:19 the next few years as opposed to easier.
3:21 In our current economic client, we have
3:23 a lot of volatility. I think lowincome
3:26 housing is going to be in increasing
3:28 demand. It's still expensive to build.
3:30 There's not a whole lot of new inventory
3:31 being built. Housing is really hard. So,
3:33 affordable housing is extremely
3:35 important. So, what do you hold when you
3:37 buy multif family? Instead of buying
3:39 these crappy houses in the middle of
3:40 nowhere, you hold these beautiful
3:42 buildings like this 144 unit, like my 76
3:45 unit, like the 44 unit. I have a senior
3:47 housing community. A whole bunch of
3:49 these seniors are on fixed income. We
3:51 provide beautiful housing for fantastic
3:54 people and we're able to offer this to
3:58 and we're able to offer this affordable
4:00 housing because of the government
4:02 subsidy programs. This is what taxes go
4:04 for. But when you stack them, instead of
4:06 buying this one house, buying a single
4:09 building with multiple section 8 tenants
4:11 as a portion of your mix, you're getting
4:14 se
4:16 you're getting the most out of section
4:19 8, and that's what you're really looking
4:20 for. So, what I'm going to do now is I'm
4:22 going to cut to the whiteboard. I'm
4:23 going to show you what the math looks
4:24 like on this. There was a year where
4:27 section 8 in my market went up $91
4:31 on average between the one beds, two
4:33 beds, three beds. It's calculated off
4:35 something called fair market rent or
4:37 FMR. That is the maximum section 8 will
4:40 pay for a tenant. If you can buy deals
4:42 where you in your underwriting, you just
4:43 determine, hey, does the deal work if I
4:46 only get this to today's FMR? If you can
4:49 price to FMR, which I've done on many,
4:51 many, many properties, and you can lease
4:53 up the property there, you mark it as
4:55 section 8 available. I want section 8 to
4:58 apply. Now, we'll still bring in some
5:00 market rate tenants. Everyone's welcome
5:02 to apply, but what ends up happening is
5:04 a large portion of my tenants actually
5:06 do have those section 8 vouchers because
5:08 we market specifically for it. The
5:10 verbiage in our listings all says
5:12 section 8 encouraged or section 8
5:14 available. We price to match this. So,
5:16 we stack the deck in our favor towards
5:18 getting applicants who are on the
5:20 section 8 program. As a result, in my
5:22 550 unit portfolio, I had 98
5:27 multif family rentals and a $91 average
5:30 increase in FMR. This means the
5:33 government paid an extra $91 per month
5:35 every single month for almost 100
5:37 tenants. Here's what the numbers look
5:39 like.
5:40 This is where the math gets crazy. I'm
5:42 so excited to show you this. Over the
5:44 past few years, I usually buy three or
5:45 four deals a year. So, as I'm doing
5:47 transactions over about a 5-year period,
5:48 I've accumulated over 500 rental units.
5:51 We recently closed on 144. I bought a
5:54 76, a 44. In fact, these are the
5:57 buildings that you're seeing in the
5:58 background earlier in this video.
6:00 Beautiful buildings, brick buildings in
6:02 Stevenville. We bought a 25, a 26. I
6:05 have a 10plex in Houston. I have another
6:08 100 something units in Washington State
6:10 and so on. We bought these buildings and
6:12 it actually doesn't take that long to
6:14 make all of this happen. So, we went
6:16 through all of this. We kept stacking
6:17 rentals and rentals and rentals. Uh, and
6:19 now you have this beautiful portfolio
6:21 and about 20% of it is on section 8. So,
6:24 what we ended up with is one year we had
6:28 a average increase between one beds, two
6:30 beds, and three beds of $91 per unit.
6:32 Now, this is over 98 units. So, $91
6:38 per month.
6:42 98
6:44 different units.
6:46 Here's where the math gets crazy. In
6:48 residential real estate, your valuation
6:50 is based on whatever your neighbors just
6:52 sold for. In commercial, it's based on
6:56 your net operating income. How much do
6:57 your expenses go up if the government
7:01 pays an additional $91 per unit?
7:04 Nothing. My utilities are the same. My
7:05 mortgage is the same. My taxes are the
7:08 same. Nothing went up because the
7:09 government's paying me more money.
7:11 However, I'm getting 91 times 98 per
7:15 month automatically doing no additional
7:18 work. So, let's break out the math. $91
7:22 times 98 units, we are making an extra
7:26 almost $9,000 a month. Now, one of the
7:29 crazy things is a lot of people have an
7:31 initial goal of setting up a $10,000 a
7:34 month income. This gets you almost all
7:36 the way there automatically in one shot.
7:39 Now on these 91 units, all returns are
7:41 evaluated annually. So our new net
7:43 operating income has gone up times 12
7:49 $100,000
7:51 a year. Actually $107,000 a year. Now in
7:55 our markets at the time, both in
7:58 Washington state and in Texas, we are
8:00 seeing an average of about a seven cap
8:02 for valuation. It's gotten a little
8:03 higher. Initially, when I started, it
8:05 was closer to a six. But all you do to
8:07 figure out how much that this is worth
8:09 to a bank, and this is what it was
8:10 actually worth to the bank, we divide
8:13 this by the cap rate, the return that
8:16 one would expect in that market. In this
8:18 case, a 7%. So, divide by
8:22 07.
8:28 That is what it's worth to me today. At
8:30 the time of my cash out refinance, it
8:33 was 91 * 98
8:37 * 12
8:39 / 06.
8:43 That is the valuation that the bank gave
8:45 me at the time that I did this. So in
8:47 those market conditions, I made 1.7
8:50 million. In today's market, if I had the
8:51 exact same thing happen the exact same
8:53 way, we would make $1.5 million. This is
8:56 why I love commercial real estate. Even
8:58 when the cap rates move up and down,
9:00 your valuations are based on
9:02 performance. This is why it's called the
9:04 section 8 stack. It's not just a single
9:06 dumpy house in the middle of nowhere.
9:08 These are beautiful buildings. They're
9:10 based on their performance. And the math
9:12 is super easy to do. How much new income
9:14 are we creating annually? And how much
9:16 is that income worth? In this case,
9:19 seven figures. I've owned these for
9:20 years. This happens every once in a
9:22 while. Now, sometimes the revenue only
9:24 goes up $20. Some years it goes up over
9:27 $100. It's based on fair market rent.
9:29 So, if you're buying in growing markets
9:31 in excellent areas, here's what you end
9:33 up with. You end up with beautiful
9:35 properties, lots of units, very high
9:38 cash flow, high values, and a very large
9:42 net worth built on beautiful buildings
9:45 and a large amount of them in growing
9:47 areas. So, you can skip these section 8
9:49 strategies of like, hey, let's buy in
9:51 middle of nowhere Midwest. I'm not
9:53 trying to buy in Gary, Indiana. I don't
9:54 want to buy in the Sorry if you happen
9:56 to invest in Gary. I'm not trying to buy
9:58 in the worst areas or the dumpiest
10:00 areas. I'm not trying to go affordable.
10:03 I'm buying the properties that I want to
10:04 own. I'm getting paid to do so. And
10:07 we're doing this again and again and
10:08 again. Section 8 is helping us create
10:11 massive checks, get government money,
10:13 have tenants who need the help get the
10:15 help they need, and our screen processes
10:17 look the same as they do for any other
10:18 tenant. This is a simple method. This is
10:20 the section 8 stack. Do this in multif
10:22 family, not single family, and you will
10:24 literally make millions of dollars on
10:26 repeat without doing any additional. If
10:28 you want more coaching on exactly how to
10:30 do this, check out multif family
10:31 strategy.com for our mentorship group.
10:32 You can actually book a call with my
10:34 team and see if this is something that
10:35 you want to get involved in. If you want
10:37 direct coaching and be in a community
10:38 where people are buying deals like this
10:40 all the time, all around the country
10:42 starting with little to no money like I
10:44 did, you can do the exact same thing
10:46 there. Again, go to multif family
10:47 strategy.com and I'll see you on the
10:49 next