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Updated over 4 years ago on . Most recent reply
6 unit section 8. what to know
There is a 6 unit multi-family building in Chicago's Douglas Park (subpar) neighborhood that advertises a "14%" cap rate as a "guaranteed subsidy." Aka section 8. It's also on the MLS. The building is $380k. Fully occupied. Annual rent collection is 55k, or around 4400 per month. The mortgage would be around $2k... too good to be true? There have been some smaller Improvements (furnaces, porch, Plumbing, Fence) but still room to value add.
Is section 8 that bad? If the income is “guaranteed” isn’t is less risky? Doesn’t it attract longer term tenants? Can’t i still pick and choose future tenants? How do you add value if you cant raise rent if the rent is based on averages?
Aka, where can i learn EVERYTHING I’d need to know?
Most Popular Reply

- Review the Section 8 Housing Quality Standards. It's not just about the voucher; It's about the building & surrounding area. Voucher holders often have to move because the building and/or area around the building no longer meets Section 8 standards. Review the standards so that when you go look at the building you know what to look for & what you may have to fix or ask the seller to fix if you purchase the building. Here's an overview:
- 1. Sanitary Facilities
- The bathroom must be located in a private room within the residence.
- The bathroom must contain a flushing toilet, a shower or tub and a sink.
- The shower or tub and the sink must have functioning hot and cold water.
- The unit must have an oven and a stove or a range. A microwave oven can be substituted.
- The unit must have a kitchen sink with hot and cold water and a proper sink trap.
- The unit must have a living room, a kitchen, and a bathroom.
- Any doors or windows that are accessible from the outside must be able to be locked.
- The heating system must safely provide heat to each room. The local PHA will determine what temperature is considered adequate during each month of the year.
- The cooling system must safely cool each room.
- The living room and each bedroom must have at least one window.
- The kitchen must have at least one working outlet.
- The living room and each bedroom must each have at least two working outlets.
- All ceilings, walls, and floors must not show any signs of bulging or buckling and must not contain large holes.
- The roof must be structurally sound.
- Handrails are required when there are four or more steps.
- Bathrooms must have a window that can be opened or must have other adequate ventilation.
- The unit must be free from dangerous pollutants, such as carbon monoxide.
- The water supply must be free from contamination.
- Plumbing pipes and fixtures must be free from leaks.
- Units constructed before 1978 must be free from lead-based paint hazards.
- There must be no chipping, cracking or peeling paint or other hazards.
- There must be two ways to exit the unit. A fire escape is considered an alternate means of exit.
- The fire escape or other emergency exit cannot be blocked.
- There must not be excessive noise or trash accumulation in the neighborhood.
- There must not be an abnormal amount of air pollution.
- There must not be a rodent or vermin infestation
- There must be at least one working smoke detector on each level of the unit, including the basement. Local codes may have stricter requirements, such as placing a smoke detector outside of each bedroom.
- All smoke detectors must be operational.
- If you're not scared off after you see the building & you get it under contract then use your attorney review & inspection period & request rent role, deposits, leases, vouchers..... Also, ask for copies of the original tenant applications. (If it's a long term tenant often they will not have the original application) A seller should be prepared to turn all of this over within 24 hours of your request. You want to see the CHA rents going straight into a bank account. You also want evidence that the tenant is paying their portion of the rent. (By the way- This applies to all deals whether it's Section 8 or not) Ask your inspector to document anything that may be non-compliant with Section 8 housing quality standards.