Buying a turnkey duplex for section 8?
Rental Property Investor · Member since 2023 · 21 posts · 20 votes
Buying a turnkey duplex for section 8?
Most Popular Reply
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
2yQuote from @Michael Smythe:
@Duarte Marques S8 tenants tend to stay longer, but they also cause higher maintenance costs.
They also have problems paying their part of the rent and utilities.
So, the 10% vacancy factor should be looked at as vacancy + tenant nonperformance.
Section 8 people are no different than anyone else aside from income levels. The problem is people dont properly screen tenants and feel its an eazy check. If you understand screening you eliminate the problems of them not paying their part or higher maintenance. If you place anyone in a regular retail rental with inept investing or management styles you will encounter those problems no matter who you rent to.
23 Replies
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
- Rental Property Investor · Member since 2023 · 21 posts · 20 votes2y
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2yOh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.
Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not. - Rental Property Investor · Member since 2023 · 21 posts · 20 votes2y
Quote from @Travis Biziorek:
Oh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not.I'm new at section 8 rentals, do you usually get a lot lower than FMR? And how long was the process to get the house section 8 approved (all the paperwork, inspection, until a section 8 moves in)? I was looking in the Ohio area.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2yTiming is incredibly variable. But FMR’s are generally optimistic at best.
Quote from @Duarte Marques:
Quote from @Travis Biziorek:
Oh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not.I'm new at section 8 rentals, do you usually get a lot lower than FMR? And how long was the process to get the house section 8 approved (all the paperwork, inspection, until a section 8 moves in)? I was looking in the Ohio area.
- 2yAustin McClainBusiness MemberReal Estate Agent · OH · Member since 2021 · 350 posts · 603 votes
Look into the area/make sure you ave a property manager that will manage in that area.
- Rental Property Investor · Member since 2023 · 21 posts · 20 votes2y
Quote from @Austin McClain:
Look into the area/make sure you ave a property manager that will manage in that area.
Do you have any recommendations of property managers that deal with section 8 in Cleveland Ohio?
- Property Manager · Cleveland, OH · Member since 2020 · 268 posts · 315 votes2y
Quote from @Duarte Marques:
Quote from @Austin McClain:
Look into the area/make sure you ave a property manager that will manage in that area.
Do you have any recommendations of property managers that deal with section 8 in Cleveland Ohio?
It's not just will the manager handle section 8, it's the specific area. We have trouble getting vendors and staff to go to certain parts of town, that's a bigger issue than if the office is willing to deal with the paperwork of section 8.
Also in Greater Cleveland one month to put in a tenant with a voucher is very aggressive. To hear back from CMHA with a rent offer is 4 weeks, another week for first inspection, if it passes on the first try then its another week for contracting. Thats all after you find the tenant, screen them, get a deposit, and submit the packet. So figure the minimum is 8 weeks.
I am concerned that the numbers just dont make sense for Cleveland right now. Make sure your not buying on the wrong side of a city/school border and are using rent comparisons that might be geographically close but are really different renter markets(like buying in East Cleveland and using Cleveland Heights rents).
Last comment, if you are using the pricing guides from CMHA as your rent standard, that would be if fair market rent comparisons are available and you pay for everything. If your tenant pays utilities, appliances, etc. It comes down significantly from that chart.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Duarte Marques your first problem is you are clueless when it comes to how Section 8 works!
The $1200 you are referring to is Gross Rent with owner paying ALL utilities - which is financial suicide with S8 tenants.
You need to figure out the Net Rent without utilities and factor in you paying for water as most cities only install one water meter per building. So, no tenant will put in their name for both units.
Most S8 properties are Class C and 7% for vacancy and 8% for maintenance won't work.
You also haven't accounted for Tenant-nonPerformance, which will happen unless you get real lucky and S8 pays 100% of rent.
Logical Property Management4.9457 Reviews - Rental Property Investor · Member since 2023 · 21 posts · 20 votes2yThanks for the info Michael! I'm new in section 8 investing and I'm here to learn! How much would you put on vacancy and maintenance then?
Quote from @Michael Smythe:
@Duarte Marques your first problem is you are clueless when it comes to how Section 8 works!
The $1200 you are referring to is Gross Rent with owner paying ALL utilities - which is financial suicide with S8 tenants.
You need to figure out the Net Rent without utilities and factor in you paying for water as most cities only install one water meter per building. So, no tenant will put in their name for both units.
Most S8 properties are Class C and 7% for vacancy and 8% for maintenance won't work.
You also haven't accounted for Tenant-nonPerformance, which will happen unless you get real lucky and S8 pays 100% of rent.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Duarte Marques we'd recommend 10% for each.
Logical Property Management4.9457 Reviews - Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes2y
Congratulations on mapping out the strategy. However, to me it sounds like you are over simplifying this. You have all these things ironed out on paper but there are dozens, if not hundreds of things in this arena that can go sideways. I want you to do much more research in regards to multiple characteristics and scenarios that could occur. The list is endless. A way to look at it is; if it were basically easy as buying a 100k turnkey and getting $2400 in cashflow just like that, nearly all investors would have hundreds of them. Do you have a competent PM in place? That alone can sink you. In most cases quality PMs wont do super low level areas, leaving incompetent bottom feeders. A bad PM can cost you tens of thousands of dollars. Do you know this community? Do you have any idea of what you are getting into? Do you understand the culture you will be catering to? If not, that WILL sink you. What if your turnkey is not up to section 8 code? What if turnkey providers are inept? Do you know the crime stats? Is this area susceptible to car jackings, murder, stray bullets? Will you be replacing condensers and appliances every few months? Do you understand that some places are nearly unrentable? A dumb assss property manager that could care less about you or your property, will load it up with grimmy tenants who destroy your property for fun. I mean the list goes on and on. You need to just be aware of all the variables or you will be on here in a few months declaring all people on Section 8 are animals. There are multiple people on BP who have experience in this space and I suggest you study study study, read, read, read, and talk to as many people with experience here that you can.
I wish you the bast and congrats on jumping in.
I want you to win!
- Rental Property Investor · Member since 2023 · 21 posts · 20 votes2y
Quote from @Mark Cruse:
Congratulations on mapping out the strategy. However, to me it sounds like you are over simplifying this. You have all these things ironed out on paper but there are dozens, if not hundreds of things in this arena that can go sideways. I want you to do much more research in regards to multiple characteristics and scenarios that could occur. The list is endless. A way to look at it is; if it were basically easy as buying a 100k turnkey and getting $2400 in cashflow just like that, nearly all investors would have hundreds of them. Do you have a competent PM in place? That alone can sink you. In most cases quality PMs wont do super low level areas, leaving incompetent bottom feeders. A bad PM can cost you tens of thousands of dollars. Do you know this community? Do you have any idea of what you are getting into? Do you understand the culture you will be catering to? If not, that WILL sink you. What if your turnkey is not up to section 8 code? What if turnkey providers are inept? Do you know the crime stats? Is this area susceptible to car jackings, murder, stray bullets? Will you be replacing condensers and appliances every few months? Do you understand that some places are nearly unrentable? A dumb assss property manager that could care less about you or your property, will load it up with grimmy tenants who destroy your property for fun. I mean the list goes on and on. You need to just be aware of all the variables or you will be on here in a few months declaring all people on Section 8 are animals. There are multiple people on BP who have experience in this space and I suggest you study study study, read, read, read, and talk to as many people with experience here that you can.
I wish you the bast and congrats on jumping in.
I want you to win!
Thanks for the help Mark! I'll continue to study, talk to other section 8 investors and read everything about section 8.
- Rental Property Investor · Member since 2023 · 21 posts · 20 votes2y
Quote from @Michael Smythe:
@Duarte Marques we'd recommend 10% for each.
Don't people with section 8 tenants tend to be longer time than cash paying tenants? I was considering 8% for maint + 5% for capex so overall 13% for "maint". 7% for vacancy and 10% prop management, overall 30%.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Duarte Marques S8 tenants tend to stay longer, but they also cause higher maintenance costs.
They also have problems paying their part of the rent and utilities.
So, the 10% vacancy factor should be looked at as vacancy + tenant nonperformance.
Logical Property Management4.9457 Reviews - Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes2y
Quote from @Michael Smythe:
@Duarte Marques S8 tenants tend to stay longer, but they also cause higher maintenance costs.
They also have problems paying their part of the rent and utilities.
So, the 10% vacancy factor should be looked at as vacancy + tenant nonperformance.
Section 8 people are no different than anyone else aside from income levels. The problem is people dont properly screen tenants and feel its an eazy check. If you understand screening you eliminate the problems of them not paying their part or higher maintenance. If you place anyone in a regular retail rental with inept investing or management styles you will encounter those problems no matter who you rent to.
- New to Real Estate · NJ (new jersey) · Member since 2019 · 75 posts · 41 votes2y
Quote from @Duarte Marques:
Quote from @Travis Biziorek:
Oh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not.I'm new at section 8 rentals, do you usually get a lot lower than FMR? And how long was the process to get the house section 8 approved (all the paperwork, inspection, until a section 8 moves in)? I was looking in the Ohio area.
You’ll probably get very similar rents without section 8 unless it was a 3 bed room which will pay a bit more. I do like your thinking but I don’t know if I would want two section 8 tenants amongst each other…and in Ohio, as much as I’ve been looking there. Idk where you getting a full turnkey duplex unless it’s in a warzone area or a D class area..
Quote from @Travis Biziorek:
Oh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not.It seems like Section 8 "influencers" are really taking hold on social media lately. They make it seem like there is an FMR arbitrage strategy available. For anyone looking to do section 8, know that you should buy based on market rent, not FMR. Thanks for pointing this out to everyone.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
Quote from @Nathan H.:
Quote from @Travis Biziorek:
Oh, I understand all of that. Crystal clear. I own 14 doors in Detroit and 3 are S8.Quote from @Duarte Marques:
Quote from @Travis Biziorek:
These numbers don't seem to add up. What market is this?
$100k for $2,400/mo gross rents... it's just not likely to happen.
It would be a section 8 rental, the fair market rent for section 8 (hud gov site 2024) on that zone is 1200 for a 2 bedroom, since it's a duplex it has two units with 2 bdr so the total rent would be 2400 (both section 8 tenants). The duplex you can buy around 100k-150k turnkey.
But you didn’t answer my question.
What market is it?
Also, FMR’s do not mean that’s what you’ll get. Lots of people thinking this is a guarantee. It’s not.It seems like Section 8 "influencers" are really taking hold on social media lately. They make it seem like there is an FMR arbitrage strategy available. For anyone looking to do section 8, know that you should buy based on market rent, not FMR. Thanks for pointing this out to everyone.
You're absolutely correct.
I spoke with several people who paid $5,000 for some S8 guru's course.
Sheesh! I'm in the wrong biz lol
- Investor · bucks County PA · Member since 2020 · 29 posts · 17 votes2y
I'm kind of in the same boat thinking this over. Section 8 tenant's can be good or bad. The question is what kind of tenant's are attracted to your location? How is the crime rates? Schools? Drug issues in the area? I heard on the BP podcast a guest say your don't screen for great tenant's, you buy property for which good tenant's want. (Absolutely later screen)
- 2yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Quote from @Duarte Marques:
Hey all, what do you think about buying a duplex turnkey for less than 100k for section 8 rental? Both 2 bdr and fair market rent on that zone is around 1200 so it would be 2400 all. It would take around 14/30 days to get section 8 approved (it's turnkey so probably it wouldn't have a problem or have minor problems, I would do an inspection first before buying) and then around 1 month to get a section 8 tenant. Then I would consider 7% vacancy reserve, 8% maint reserve and 5% capex.
We manage around 400 units and have very few Section 8.
Some companies and investors build their entire strategy and portfolio around Section 8 and it seems to work well for them.
Always underestimate your income and overestimate your expenses.
Give yourself an extra margin of safety also.
Section 8 has some weird rules that have to be abided by so you might incur extra Capex long term costs.
Much success
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