A financially independent real-estate investor shares his 'recession-proof' strategy and the renovation that improved his cash flow by hundreds of dollars a month

• Kent He increased rent by $550 a month by adding a bedroom to his affordable housing unit.
• His 'recession-proof' investment strategy involves operating Airbnbs and affordable housing units.
• Benefits to investing in affordable housing include predictable, reliable income.

When Kent He's Section 8 tenant moved out of his single-family 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 doing so, he said.

The investment has already started to pay off.

He told Business Insider that the three-bedroom was bringing in $700 a month in rent. Thanks mainly to the additional bedroom, the Birmingham Housing Authority determined that the property can now be rented for $1,257. BI confirmed these details by viewing the certification He received from the housing authority.

That's about a $550 increase in monthly rent — or, an extra $6,600 a year.

Just because his cash flow increases doesn't mean his tenant's payment does, he noted: "For housing choice vouchers, a tenant is responsible for paying 30-40% of their income toward the rent. If they lose their job or rents continue to go up, their portion on a percentage basis stays the same; the government will come in and fill the rest."

The full-time investor, who lives in San Diego and owns two Airbnb units in Scottsdale, said that he often thinks through, "What are your value-add strategies? How can you provide a good experience to your tenant while also generating some additional cash flow by being creative with the square footage?"

He's learned that "the housing choice vouchers typically pay based on the bedroom count. And, two bathrooms — houses with two toilets — rent out easier than homes with one toilet. We knew we had a good property and thought, let's take advantage of the space that we have and create a better product."

Owning an affordable housing unit is part of his greater "recession-proof" investment strategy.

A 'recession-proof strategy': Short-term rentals for cash flow + affordable housing units 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 their restaurant business around and re-entered corporate America in 2017 when he got a job at a major insurance company.

Eager to exit the corporate world, he decided to try real-estate investing on the side. Specifically, he wanted to set up short-term vacation rentals, which, according to his research, seemed to be higher-risk but the most lucrative real-estate strategy.

He was right: After purchasing two properties in Scottsdale in 2021 and 2022 and turning them into bachelorette-themed Airbnbs, he started earning enough from his short-term rental units to cover his family's expenses and quit his day job.

Despite his success on 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 volatile. Early in the pandemic, when travel was halted and some state and local governments banned short-term rentals to stop the spread of COVID-19, Airbnb hosts saw their calendars wiped clean.

"For peace of mind, I want to know that there's always other cash flow coming in from another asset class," said He.

That's where the second part of his strategy comes into play: buying affordable housing units.

"It's a great diversification approach," said He. "You have short-term rentals with a higher risk and more active approach to managing. And then you have the long-term rental which might be a little bit passive, lower cash flow, but much more predictable and stable income coming from the government that's paying your rent every single month."

The benefits of providing affordable housing: Diversification, predictable income

There are a handful of misconceptions about affordable housing, said He, who has built a YouTube channel dedicated to the topic: "A lot of folks, when they think about affordable housing they associate it with the projects, with guns, drugs, and drama; when, in reality, it's really hardworking folks, like my parents, who just needed a stable roof over their heads."

His parents immigrated to the US from China "with about $1,000," he said, and raised him in an affordable housing unit.

In addition to providing families in need with a nice roof over their heads, buying affordable housing has unique benefits for the investor.

As a Section 8 landlord, you can collect rent reliably, said He: "Even if the Section 8 tenant loses their job, the government will come in and pay the rest of the rent. That is what I'm calling a recession-proof investment because the government will always pay their rent on time for your voucher holders."

Plus, "there's some kind of accountability on the tenant side because the tenant doesn't want to lose their voucher," said He, who explained that in some counties the waitlist for a housing choice voucher can be 12 to 15 years. "There are going to be exceptions — there are still going to be bad apples here and there — but for the most part, folks that desperately need housing for their families value the vouchers very much so, because it's essentially hitting 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 home just to make sure it's in good condition."

With a traditional rental, if you have a long-term tenant, "you might wait five, 10 years and you never know what's happening inside your home. It's a great accountability mechanism to make sure you are providing a great living experience for the tenant. But as a landlord, you're also understanding what's happening inside your home, so that if anything needs to be fixed, you're taking care of it right away instead of deferring that maintenance and potentially causing more issues for you down the road."