There are many misconceptions when it comes to investing in affordable housing. Some people may associate affordable housing with low-quality tenants and lower profits. The thing is these aspects can be true for any real estate investment.

If you do your due diligence and invest smartly, there are many upsides to investing in affordable housing.

Profitability

The need for affordable housing is prevalent. Buying, renovating, then renting affordable housing has a chance to turn a profit. Like any real estate investment, you need to know how much you’re investing and what your margin is. That margin may make renovating an old property more practical than building from the ground up.

With accepting Section 8 vouchers, you need to run the math on how much you can charge. These rental vouchers cover a percentage of a tenant’s rent depending on AMI. There may be a potential cap rate on affordable housing investments.

Recession Proof

Demand for affordable housing exists in both hot and cold real estate markets and can exist in a variety of areas. While luxury housing may seem like a more appealing investment to some, it’s more susceptible to market shifts. If there’s an economic downturn, the demand for affordable housing may increase, where demand for luxury housing can plummet.

Government-Backed

Affordable housing is backed by the government, which removes a lot of risk. Section 8 vouchers mean the government makes direct payments to the landlord. If a tenant loses their job, these payments will still be made to the landlord.