Buying a Section 8 Property from a Wholesaler
Hello,
I have acquired a few properties before but never have I acquired one from a wholesaler nor have I owned a Section 8 property. I never intended to get a Section 8 property but a deal was sent to me by a wholesaler that just seems to good to be true - however, every step of the way in my due diligence process indicates this may be a deal worth considering. Details are as follows:
-Wholesaler is offering a 4 bedroom/1 bathroom house for 40k$. The pictures indicate the house could use some surface cosmetic work. The wholesaler is claiming there are no major defects with the home and the roof was replaced a few years ago.
-Comps for similar condition, similar size homes in the area are in the 30-45k$ range.
-The property is currently being rented on a month to month basis (1 year lease expired a few months ago) at 1174 $/month. This rent is wholly covered by the Section 8 program.
-I have confirmed that the house is indeed Section 8 approved. The owner has forwarded a letter from the housing authority stating that as of 11/1/17 the approved rent assistance for the current tenant is 1174$/month. As a double check I called the housing authority and they did confirm the house is Section 8 approved.
-The house is being sold as a cash only deal for expedition. I would prefer financing but from my understanding this can be typical for these type of wholesale deals. Hoping to refinance soon after buying.
At 1174$/month in a guaranteed rent check from the government and an asking price of 40k$ this is very hard for me to pass up. My plan is to get an inspector out ASAP so that I can understand the condition of the property - my main concern being the major components such as roof, foundation, piping, electrical, etc. I have never bought from a wholesaler before though and usually had the loan process and a real estate agent to act as additional protections that I am not missing anything. My questions are:
-What other things should I be considering here as part of my due diligence process?
-1174$/month is definitely high for rents in the area. From the research I have done a similar house would rent for 700-900$/month on the open market. The housing authority has approved it for 1174$ though. What risk do I have of losing that level of rent and/or Section 8 status and having a place that rents for much less than it currently does?
-Is there any value in me using a real estate agent to represent me in this transaction? I have a friend who is an agent and his honest opinion was that not much value would be added having an agent for this transaction. He advised that I just need to do my own due diligence with a proper inspection report to identify potential repair work needed and getting title insurance.
As you can see, on paper this deal looks great. My main concern is that the 1174$/month is higher rent than similar properties I am finding in the area. Am I wrong to assume that if the current tenant moves out I will be able to get another Section 8 tenant placed for the same price?