- Kent He raised the rent by $550 a month by adding a bedroom to his affordable housing unit.
- His ‘recession-proof’ investment strategy includes operating Airbnbs and affordable housing units.
- The benefits of investing in affordable housing include predictable and reliable income.
When Kent He’s Section 8 tenant moved out of his single home in Fairfield, Alabama in 2024, the investor saw an opportunity to improve his property.
He decided to add a room and convert the three-bedroom into a four-bedroom — and spent about $41,000 to do so, he said.
The investment is already starting to pay off.
He told Business Insider that the three-bedroom was bringing in $700 a month in rent. Thanks in large part to the extra bedroom, the Birmingham Housing Authority determined that the property can now rent for $1,257. BI confirmed these details by looking at the certificate He received from the housing authority.
That’s a $550 increase in monthly rent — or, an extra $6,600 a year.
Just because his cash flow goes up doesn’t mean the tenant’s payment is going up, he noted: “For Housing Choice Vouchers, a tenant is responsible for paying 30-40% of their income If they lose their jobs or rents continue to rise, their percentage share remains the same.
The full-time investor, who lives in San Diego and owns two Airbnb units in Scottsdale, said he often thinks, “What are your strategies to add value? How can you provide a good experience for your renter while also generating some extra cash flow by being creative with the square footage?”
He’s learned that “Housing Choice vouchers usually pay based on the number of bedrooms. And, two bathrooms — two-bathroom homes — rent more easily than one-bathroom homes. We knew we had a good property. and we thought, let’s take advantage of the space we have and create a better product.”
Owning an affordable housing unit is part of it “Recession-proof” investment strategy..
An ‘anti-recession strategy’: short-term rentals for cash flow + affordable housing for stability
After graduating from Bentley University in 2011, he worked as a consultant at PricewaterhouseCoopers for nearly four years. He left PwC to help a family member turn around their restaurant business and re-entered corporate America in 2017 when he took a job at a major insurance company.
Eager to get out of the corporate world, he decided to try real estate investing. Specifically, he wanted to create short-term vacation rentals, which, according to his research, appeared to be the highest risk but most profitable real estate strategy.
He was right: After buying two properties in Scottsdale in 2021 and 2022 and by turning them into bachelorette-themed Airbnbs, he started making enough from his short-term rentals to cover his family’s expenses and quit his day job.
Kent He owns two Airbnb properties in Scottsdale designed specifically for single travelers. Courtesy of Kent He
Despite his success at Airbnb – in 2023, his two units brought in more than $240,000 — he didn’t want to rely on the short-term rental strategy, which has proven to be unsustainable. At the beginning of the pandemic, when travel was banned and some state and local governments banned short-term rentals to stop the spread of COVID-19, Airbnb hosts saw their calendars wiped out.
“For peace of mind, I want to know that there are always other cash flows coming from another active class,” He said.
This is where the second part of his strategy comes into play: buying affordable housing.
“It’s a great diversification approach,” He said. “You have short-term leases with a higher risk and a more active approach to management. And then you have long-term leases which can be a bit passive, lower cash flow, but much more predictable and more sustainable that come from the government that pays you rent every month.”
Benefits of providing affordable housing: Diversification, predictable income
There are a handful of misconceptions about affordable housing, said Ai, who has built a YouTube channel dedicated to the topic: “Many people, when they think of affordable housing, associate it with the projects, with guns and drugs and drama; when, in fact, they are really hardworking people, like my parents, who just needed a stable roof over their heads”.
His parents immigrated to the U.S. from China “with about $1,000,” he said, and raised him in an affordable housing unit.
Kent He and his family reside in San Diego. Courtesy of Kent He
In addition to providing a nice roof over the heads of families in need, purchasing affordable housing has unique benefits for the investor.
As a Section 8 landlord, you can reliably collect rent, He said: “Even if the Section 8 tenant loses his job, the government will step in and pay the rest of the rent. That’s what I’m doing call it a recession-proof investment because the government will always pay their rent on time to your voucher holders.”
Plus, “there’s some kind of responsibility on the part of the tenant because the tenant doesn’t want to lose their voucher,” said He, who explained that in some counties the waiting list for a Housing Choice voucher can be 12 to 15 years . “There will be exceptions — there will still be bad apples here and there — but for the most part, people who desperately need housing for their families really appreciate the vouchers because it’s basically a jackpot. “
Another aspect of the program is a housing inspection every one to two years, he said: “The local housing authority will come and inspect the house just to make sure it’s in good shape.”
With a traditional lease, if you have a long-term tenant, “you can wait five, 10 years and you never know what’s going on inside your home. It’s a great accountability mechanism to make sure you’re providing a great experience living for the tenant But as a landlord, you’re also understanding what’s going on inside your home, so if something needs fixing, you’re taking care of it right away instead of putting off that maintenance and potentially causing you more problems along the way.”
