Section 8 rentals in Low-income areas. Is it worth it?

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

Section 8 rentals in Low-income areas. Is it worth it?

Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes

There are many people who stand on the mountain top and warn against investing in the core neighborhoods of the inner-city. But why?? A basic Zillow search shows a listing for a 3 bedroom 2 bath brick home on Detroit's westside for $45,000. From the photos it looks like a $30k renovation. based on what I know about the area it will ARV at roughly $115-$120k. So it is a candidate for those using the BRRRR strategy. The rent for a Section 8 tenant will be roughly $1450.00 so this will definitely cashflow. There are plenty of such deals here but investors are often reluctant. Why?

Here are the typical caveats:

1. Shady contractors and Property Managers will run off or take your money and fail to deliver the home with a Section 8 tenant.

Yes, this can be an issue, however there is nothing specifically shady about inner city real estate professionals that isn't equally true everywhere. I think a simple conversation will weed out a good portion of those who can't or won't deliver.

2. Low income tenants will destroy your property

As a Property Manager currently managing many Section 8 rentals I can confirm that there are tenants who will be rough on the properties they live in, that said this can be mitigated by using materials during the renovation which are durable like certain LVT, cabinets, and paint finishes.

3. Homes are often vandalized or broken into during and after renovation:

There are proven ways around this. We have very few break-ins using methods that any experienced management company will know

4. The inner City is not landlord friendly- Not necessarily true. Most forward thinking City halls in the USA have come to understand the importance of attractijng and retaining investors who want to add value to the neighborhoods. Detroit is no exception. There are those who come into the core neighborhoods with the thinking that they can exploit Section 8 and other programs aimed at fighting homelessness and for those sorts there will be obstacles. plenty of them. For those who truly want to come into the communities and improve the neighborhood they find that urban governments are rolling out the red carpet.

I would love to know what others think on this topic?

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

9mo

Real problem is not matter how hard you try to properly set their expectations, owners freak out over anything negative!

Tenant breaks something - why'd the PMC let that happen?

Tenant didn't pay their portion of the rent - why can't PMC go over to property and threaten tenant to get the rent?

Tenant breaks lease early - how did the PMC allow that?

Tenant gets a dog or moves in a boyfriend - why was that allowed?

And on and on and on...

[email protected]248-209-6824

Logical Property Management4.9458 Reviews

Website View Page

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James JonesPro Member
Investor · Collierville, TN 38017 · Member since 2017 · 612 posts · 452 votes
10mo
Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.

We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:

1️⃣ Use durable materials

LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.

2️⃣ Have a clear make-ready standard

Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.

3️⃣ Only hire contractors and PMs with actual Section 8 experience

This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.

In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.

Curious to hear what rent levels you’re seeing in your area compared to market?
1 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  10mo
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  You gotta go Section 8 in the ghetto. Too many evictions if you're chasing hood rats around for rent money.
  0 Reply
- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  0 Reply
- James JonesPro Member
  Investor · Collierville, TN 38017 · Member since 2017 · 612 posts · 452 votes
  9mo
  Quote from @Leroy K. Williams:
  
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  Really well said, and I couldn’t agree more.
  A lot of new or out-of-state investors get stuck in the idea of “Would I live here?” when the real question is “Does this home meet the standards of the tenant demographic I’m serving?”
  
  For workforce and Section 8 housing, functionality beats aesthetics every time.
  If the lights work, the doors lock, the plumbing drains, the heat runs, and the place feels safe, you’ve already solved 90 percent of what matters to that resident.
  
  I tell new investors all the time: over-improving is one of the fastest ways to destroy your returns.
  Not because granite countertops or designer paint are bad, but because the resident isn’t paying extra for them. And as you mentioned, many of our Section 8 families are single parents juggling life, they’re looking for reliability, not luxury finishes.
  
  Where experienced operators win is by creating homes that are:
  
  Safe
  
  Functional
  
  Durable
  
  Easy to maintain long-term
  
  That’s what keeps inspections smooth, turnovers low, and cash flow consistent.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  0 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  9mo
  Quote from @James Jones:
  
  Quote from @Leroy K. Williams:
  
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  Really well said, and I couldn’t agree more.
  A lot of new or out-of-state investors get stuck in the idea of “Would I live here?” when the real question is “Does this home meet the standards of the tenant demographic I’m serving?”
  
  For workforce and Section 8 housing, functionality beats aesthetics every time.
  If the lights work, the doors lock, the plumbing drains, the heat runs, and the place feels safe, you’ve already solved 90 percent of what matters to that resident.
  
  I tell new investors all the time: over-improving is one of the fastest ways to destroy your returns.
  Not because granite countertops or designer paint are bad, but because the resident isn’t paying extra for them. And as you mentioned, many of our Section 8 families are single parents juggling life, they’re looking for reliability, not luxury finishes.
  
  Where experienced operators win is by creating homes that are:
  
  Safe
  
  Functional
  
  Durable
  
  Easy to maintain long-term
  
  That’s what keeps inspections smooth, turnovers low, and cash flow consistent.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  I've managed C-Class / Section 8 type of properties for 100's & 100's of out of state investors. I do not believe I've ever seen any of them attempt to turn a C-Class rehab into an A-Class rehab. It's almost exclusively the out of state investor trying to cut corners and make their rehabs cheaper than they need to be in order to be functional and pass city and/or Section 8 inspections.
  
  Who are these investors brother? Where are they? They ain't here on BP.
  
  1 Reply
- James JonesPro Member
  Investor · Collierville, TN 38017 · Member since 2017 · 612 posts · 452 votes
  9mo
  Quote from @James Wise:
  
  Quote from @James Jones:
  
  Quote from @Leroy K. Williams:
  
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  Really well said, and I couldn’t agree more.
  A lot of new or out-of-state investors get stuck in the idea of “Would I live here?” when the real question is “Does this home meet the standards of the tenant demographic I’m serving?”
  
  For workforce and Section 8 housing, functionality beats aesthetics every time.
  If the lights work, the doors lock, the plumbing drains, the heat runs, and the place feels safe, you’ve already solved 90 percent of what matters to that resident.
  
  I tell new investors all the time: over-improving is one of the fastest ways to destroy your returns.
  Not because granite countertops or designer paint are bad, but because the resident isn’t paying extra for them. And as you mentioned, many of our Section 8 families are single parents juggling life, they’re looking for reliability, not luxury finishes.
  
  Where experienced operators win is by creating homes that are:
  
  Safe
  
  Functional
  
  Durable
  
  Easy to maintain long-term
  
  That’s what keeps inspections smooth, turnovers low, and cash flow consistent.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  I've managed C-Class / Section 8 type of properties for 100's & 100's of out of state investors. I do not believe I've ever seen any of them attempt to turn a C-Class rehab into an A-Class rehab. It's almost exclusively the out of state investor trying to cut corners and make their rehabs cheaper than they need to be in order to be functional and pass city and/or Section 8 inspections.
  
  Who are these investors brother? Where are they? They ain't here on BP.
  
  James, totally hear you. In my market, I see a different flavor of the same problem. It’s not that investors are trying to create A-class finishes, it’s that they over-renovate for the tenant base and overspend on things that don’t move the needle for Section 8 or city inspections.
  
  A lot of newer investors think “nicer equals safer” or “better rehab equals better tenant,” and they end up blowing budgets on upgrades that provide zero additional rent or inspection benefit. Then the numbers fall apart before they ever place a tenant.
  
  Your point is spot on. In C-class, the win is functional, durable, and compliant. Everything beyond that usually just eats your cash flow.
  1 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  9mo
  Quote from @James Jones:
  
  Quote from @James Wise:
  
  Quote from @James Jones:
  
  Quote from @Leroy K. Williams:
  
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  Really well said, and I couldn’t agree more.
  A lot of new or out-of-state investors get stuck in the idea of “Would I live here?” when the real question is “Does this home meet the standards of the tenant demographic I’m serving?”
  
  For workforce and Section 8 housing, functionality beats aesthetics every time.
  If the lights work, the doors lock, the plumbing drains, the heat runs, and the place feels safe, you’ve already solved 90 percent of what matters to that resident.
  
  I tell new investors all the time: over-improving is one of the fastest ways to destroy your returns.
  Not because granite countertops or designer paint are bad, but because the resident isn’t paying extra for them. And as you mentioned, many of our Section 8 families are single parents juggling life, they’re looking for reliability, not luxury finishes.
  
  Where experienced operators win is by creating homes that are:
  
  Safe
  
  Functional
  
  Durable
  
  Easy to maintain long-term
  
  That’s what keeps inspections smooth, turnovers low, and cash flow consistent.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  I've managed C-Class / Section 8 type of properties for 100's & 100's of out of state investors. I do not believe I've ever seen any of them attempt to turn a C-Class rehab into an A-Class rehab. It's almost exclusively the out of state investor trying to cut corners and make their rehabs cheaper than they need to be in order to be functional and pass city and/or Section 8 inspections.
  
  Who are these investors brother? Where are they? They ain't here on BP.
  
  James, totally hear you. In my market, I see a different flavor of the same problem. It’s not that investors are trying to create A-class finishes, it’s that they over-renovate for the tenant base and overspend on things that don’t move the needle for Section 8 or city inspections.
  
  A lot of newer investors think “nicer equals safer” or “better rehab equals better tenant,” and they end up blowing budgets on upgrades that provide zero additional rent or inspection benefit. Then the numbers fall apart before they ever place a tenant.
  
  Your point is spot on. In C-class, the win is functional, durable, and compliant. Everything beyond that usually just eats your cash flow.
  
  No. That's not what they do at all. They never try to overspend. They always try to underspend.
  
  0 Reply
- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @James Wise:
  
  Quote from @James Jones:
  
  Quote from @James Wise:
  
  Quote from @James Jones:
  
  Quote from @Leroy K. Williams:
  
  Quote from @James Jones:
  
  Great breakdown, Leroy. Most investors avoid these areas because they hear the horror stories without understanding that the real problem isn’t Section 8, it’s poor systems.
  
  We’ve placed hundreds of Section 8 tenants in historically “rougher” neighborhoods, and the investors who win consistently do three things:
  
  1️⃣ Use durable materials
  
  LVP, solid cabinets, simple paint, and no over-customization. Durability beats design every time.
  
  2️⃣ Have a clear make-ready standard
  
  Most damage comes from inconsistent turnovers. When you standardize repairs and expectations, you remove 90 percent of the surprises.
  
  3️⃣ Only hire contractors and PMs with actual Section 8 experience
  
  This is where most people get burned. The right team knows the inspection process, the neighborhoods, and how to protect your asset while still keeping the numbers strong.
  
  In the right markets, Section 8 in lower-income areas isn’t just “worth it” — it often outperforms market rent in both cash flow and stability.
  
  Curious to hear what rent levels you’re seeing in your area compared to market?
  
  Great insights James and I agree. Many out of state investors will ask contractors and PM's to create housing that "I would live in myself". I think the sentiment is noble however over improving a property is 100% a sign of inexperience. The craziest part is that the tenant won't pay as much attention to the paint colors, and the lighting as one might think. What stands out to low income tenants is the functionality of the unit. Are all of the lights working? Do the entry doors have sufficient locks, does the basement ever back up? The tenants for Section 8 homes will likely be single mothers who lack a background in home repair and for them its about feeling safe, secure, and relatively comfortable.
  
  Really well said, and I couldn’t agree more.
  A lot of new or out-of-state investors get stuck in the idea of “Would I live here?” when the real question is “Does this home meet the standards of the tenant demographic I’m serving?”
  
  For workforce and Section 8 housing, functionality beats aesthetics every time.
  If the lights work, the doors lock, the plumbing drains, the heat runs, and the place feels safe, you’ve already solved 90 percent of what matters to that resident.
  
  I tell new investors all the time: over-improving is one of the fastest ways to destroy your returns.
  Not because granite countertops or designer paint are bad, but because the resident isn’t paying extra for them. And as you mentioned, many of our Section 8 families are single parents juggling life, they’re looking for reliability, not luxury finishes.
  
  Where experienced operators win is by creating homes that are:
  
  Safe
  
  Functional
  
  Durable
  
  Easy to maintain long-term
  
  That’s what keeps inspections smooth, turnovers low, and cash flow consistent.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  Appreciate your perspective, more investors need to hear this instead of trying to turn C-class rentals into A-class rehabs.
  
  I've managed C-Class / Section 8 type of properties for 100's & 100's of out of state investors. I do not believe I've ever seen any of them attempt to turn a C-Class rehab into an A-Class rehab. It's almost exclusively the out of state investor trying to cut corners and make their rehabs cheaper than they need to be in order to be functional and pass city and/or Section 8 inspections.
  
  Who are these investors brother? Where are they? They ain't here on BP.
  
  James, totally hear you. In my market, I see a different flavor of the same problem. It’s not that investors are trying to create A-class finishes, it’s that they over-renovate for the tenant base and overspend on things that don’t move the needle for Section 8 or city inspections.
  
  A lot of newer investors think “nicer equals safer” or “better rehab equals better tenant,” and they end up blowing budgets on upgrades that provide zero additional rent or inspection benefit. Then the numbers fall apart before they ever place a tenant.
  
  Your point is spot on. In C-class, the win is functional, durable, and compliant. Everything beyond that usually just eats your cash flow.
  
  No. That's not what they do at all. They never try to overspend. They always try to underspend.
  
  @James Wise, yes you do have a class of investors who want to do the absolute minimum. These tend to be foreign investors who have shaped their opinions about the inner city and the people who live there. They don't seem to have an iota respect for the residents. I don't even entertain investors like these. It's a waste of time and energy. Property Managers see these sorts coming from a mile away.
  On the other hand, if you have dealt with the kind of clients James Jones and I are describing, you have met those who seem to have good intentions yet are too inexperienced to understand how best to stay within budget while creating a final product suitable for low income/Section 8 tenants. This sort of client may be the moral opposite of the slumlord. They are just trying to do too much
  
  Experienced Inner-City PM's understand the people in the community, they understand local government and the various Section 8 offices. They have been in the trenches and have seen the reality of the process from the outside in and the inside out. We know exactly what low income tenants look forward to when moving into a new house.
  
  0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10mo
Quote from @Leroy K. Williams:

There are many people who stand on the mountain top and warn against investing in the core neighborhoods of the inner-city. But why?? A basic Zillow search shows a listing for a 3 bedroom 2 bath brick home on Detroit's westside for $45,000. From the photos it looks like a $30k renovation. based on what I know about the area it will ARV at roughly $115-$120k. So it is a candidate for those using the BRRRR strategy. The rent for a Section 8 tenant will be roughly $1450.00 so this will definitely cashflow. There are plenty of such deals here but investors are often reluctant. Why?
Here are the typical caveats:
1. Shady contractors and Property Managers will run off or take your money and fail to deliver the home with a Section 8 tenant.
Yes, this can be an issue, however there is nothing specifically shady about inner city real estate professionals that isn't equally true everywhere. I think a simple conversation will weed out a good portion of those who can't or won't deliver.
2. Low income tenants will destroy your property
As a Property Manager currently managing many Section 8 rentals I can confirm that there are tenants who will be rough on the properties they live in, that said this can be mitigated by using materials during the renovation which are durable like certain LVT, cabinets, and paint finishes.
3. Homes are often vandalized or broken into during and after renovation:
There are proven ways around this. We have very few break-ins using methods that any experienced management company will know
4. The inner City is not landlord friendly- Not necessarily true. Most forward thinking City halls in the USA have come to understand the importance of attractijng and retaining investors who want to add value to the neighborhoods. Detroit is no exception. There are those who come into the core neighborhoods with the thinking that they can exploit Section 8 and other programs aimed at fighting homelessness and for those sorts there will be obstacles. plenty of them. For those who truly want to come into the communities and improve the neighborhood they find that urban governments are rolling out the red carpet.
I would love to know what others think on this topic?

3. Homes are often vandalized or broken into during and after renovation:

There are proven ways around this. We have very few break-ins using methods that any experienced management company will know

You guys use the ole' Sniper in the bedroom window too?
1 Reply
- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @James Wise:
  
  Quote from @Leroy K. Williams:
  
  There are many people who stand on the mountain top and warn against investing in the core neighborhoods of the inner-city. But why?? A basic Zillow search shows a listing for a 3 bedroom 2 bath brick home on Detroit's westside for $45,000. From the photos it looks like a $30k renovation. based on what I know about the area it will ARV at roughly $115-$120k. So it is a candidate for those using the BRRRR strategy. The rent for a Section 8 tenant will be roughly $1450.00 so this will definitely cashflow. There are plenty of such deals here but investors are often reluctant. Why?
  Here are the typical caveats:
  1. Shady contractors and Property Managers will run off or take your money and fail to deliver the home with a Section 8 tenant.
  Yes, this can be an issue, however there is nothing specifically shady about inner city real estate professionals that isn't equally true everywhere. I think a simple conversation will weed out a good portion of those who can't or won't deliver.
  2. Low income tenants will destroy your property
  As a Property Manager currently managing many Section 8 rentals I can confirm that there are tenants who will be rough on the properties they live in, that said this can be mitigated by using materials during the renovation which are durable like certain LVT, cabinets, and paint finishes.
  3. Homes are often vandalized or broken into during and after renovation:
  There are proven ways around this. We have very few break-ins using methods that any experienced management company will know
  4. The inner City is not landlord friendly- Not necessarily true. Most forward thinking City halls in the USA have come to understand the importance of attractijng and retaining investors who want to add value to the neighborhoods. Detroit is no exception. There are those who come into the core neighborhoods with the thinking that they can exploit Section 8 and other programs aimed at fighting homelessness and for those sorts there will be obstacles. plenty of them. For those who truly want to come into the communities and improve the neighborhood they find that urban governments are rolling out the red carpet.
  I would love to know what others think on this topic?
  
  3. Homes are often vandalized or broken into during and after renovation:
  
  There are proven ways around this. We have very few break-ins using methods that any experienced management company will know
  
  You guys use the ole' Sniper in the bedroom window too?
  
  Not the sniper in the window, we try not to Kill the neighbors.
  
  There are legal ways to deter theft.
  
  1. Rehab smart by placing high theft items into the property toward the end of the renovation'
  2. Hire someone for basic cleaning, labor from the community even if its one of the people you see lurking.
  
  3. In the interim between the close of the repairs and tenant placement set up a security system.
  
  0 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  9mo
  Quote from @Leroy K. Williams:
  
  Quote from @James Wise:
  
  Quote from @Leroy K. Williams:
  
  There are many people who stand on the mountain top and warn against investing in the core neighborhoods of the inner-city. But why?? A basic Zillow search shows a listing for a 3 bedroom 2 bath brick home on Detroit's westside for $45,000. From the photos it looks like a $30k renovation. based on what I know about the area it will ARV at roughly $115-$120k. So it is a candidate for those using the BRRRR strategy. The rent for a Section 8 tenant will be roughly $1450.00 so this will definitely cashflow. There are plenty of such deals here but investors are often reluctant. Why?
  Here are the typical caveats:
  1. Shady contractors and Property Managers will run off or take your money and fail to deliver the home with a Section 8 tenant.
  Yes, this can be an issue, however there is nothing specifically shady about inner city real estate professionals that isn't equally true everywhere. I think a simple conversation will weed out a good portion of those who can't or won't deliver.
  2. Low income tenants will destroy your property
  As a Property Manager currently managing many Section 8 rentals I can confirm that there are tenants who will be rough on the properties they live in, that said this can be mitigated by using materials during the renovation which are durable like certain LVT, cabinets, and paint finishes.
  3. Homes are often vandalized or broken into during and after renovation:
  There are proven ways around this. We have very few break-ins using methods that any experienced management company will know
  4. The inner City is not landlord friendly- Not necessarily true. Most forward thinking City halls in the USA have come to understand the importance of attractijng and retaining investors who want to add value to the neighborhoods. Detroit is no exception. There are those who come into the core neighborhoods with the thinking that they can exploit Section 8 and other programs aimed at fighting homelessness and for those sorts there will be obstacles. plenty of them. For those who truly want to come into the communities and improve the neighborhood they find that urban governments are rolling out the red carpet.
  I would love to know what others think on this topic?
  
  3. Homes are often vandalized or broken into during and after renovation:
  
  There are proven ways around this. We have very few break-ins using methods that any experienced management company will know
  
  You guys use the ole' Sniper in the bedroom window too?
  
  Not the sniper in the window, we try not to Kill the neighbors.
  
  There are legal ways to deter theft.
  
  1. Rehab smart by placing high theft items into the property toward the end of the renovation'
  2. Hire someone for basic cleaning, labor from the community even if its one of the people you see lurking.
  
  3. In the interim between the close of the repairs and tenant placement set up a security system.
  
  We just sprinkle some Fentanyl next to some bear traps. Catches um everytime.
  0 Reply
Frank PyleBusiness Member
Specialist · USA · Member since 2024 · 279 posts · 130 votes
9mo
I get why people hesitate, because the Zillow math can look perfect but the hidden risk is all execution and liquidity. In pockets like Detroit west side you can get hit with theft during rehab, bigger turns, higher insurance, appraisals that come in light, and longer vacancy when you miss on tenant quality or the block is rough, so the BRRRR refi is not as clean as it looks.

On the Section 8 piece I am in Indianapolis and we have had our own reason to be cautious. With IHA under HUD oversight lately it has felt unstable and with no new vouchers being issued right now you cannot underwrite lease up on voucher rent the same way, so I push investors to pencil market rent first and treat Section 8 as upside, not the whole strategy.
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- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @Frank Pyle:
  
  I get why people hesitate, because the Zillow math can look perfect but the hidden risk is all execution and liquidity. In pockets like Detroit west side you can get hit with theft during rehab, bigger turns, higher insurance, appraisals that come in light, and longer vacancy when you miss on tenant quality or the block is rough, so the BRRRR refi is not as clean as it looks.
  
  On the Section 8 piece I am in Indianapolis and we have had our own reason to be cautious. With IHA under HUD oversight lately it has felt unstable and with no new vouchers being issued right now you cannot underwrite lease up on voucher rent the same way, so I push investors to pencil market rent first and treat Section 8 as upside, not the whole strategy.
  
  I will readily admit that there is truth in what you are saying as it relates to the risks with BRRRR in Detroit and the same is likely true anywhere in the inner cities of the USA. That said just as you can identify the risks, you can also figure out ways to mitigate those risks. This is 100% where local experience comes in.
  1. You mentioned theft during rehab. That's absolutely a real thing so how do you address this? You rehab strategically. SWe have recently created 15-20 Section 8 rentals and the total loss to break in was less than $1,500 across all of the properties and most of that was the damaged caused by the break in itself. So what does it mean to rehab strategically. You have to take into account that you are being watched and so you have to coordinate the timing of the install of high theft items toward the close of the project even if it is counterproductive as it relates to the naturally way a project should flow. Example: Most rehab guys will say " Get your plumbing, HVAC and electrical done first" Yeah that is a great idea in low crime areas but not the smartest way to do the inner city.
  2. "Bigger turns" yes, that is an issue however this can be mitigated with being a little less anxious and hungry to buy the first deal that comes across your plate and instead being more selective on the front end. The sweet spot for Detroit BRRRR is 3 bd 1 bath bungalows. There are zip codes teeming with these kind of homes. The rehab costs are very predictable and there aren't many surprises in terms of hidden rehab costs.
  3. "Appraisals that come in light". True again, so here is how to fix that problem, you have your properties pre-appraised before purchase, not just a simple value check by running comps but a deeper dive with an appraiser who has a relationship with a DSCR lender- This way your exit strategy is in place and once again your end number is known beforehand
  4. "Higher insurance" So there isn't much you can do here however if you purchase right you can offset your OpEx at the point of your refi by accounting for that in your reserves. The is cashflow so pay the high insurance it will likely being offset by savings somewhere else.
  5 "vacancy" this is another place where working smarter not harder comes into play. You mentioned something about HUD cracking down on the PHAs there in Indianapolis. Like most cities I am sure there is a homelessness issue and with fewer vouchers being issued that will exacerbate the homelessness problem. This is where building relationships with agencies come in. Most cities will have Homelessness prevention and Rapid rehousing programs tied into the HAP in the state. Understanding these programs is crucial to quickly placing tenants. Yes, the tenants assigned from these sorts of agencies with have additional social issues but a good Management team will have to also wear the extra hat of being a quasi social service agency
  
  0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
9mo
Real problem is not matter how hard you try to properly set their expectations, owners freak out over anything negative!
Tenant breaks something - why'd the PMC let that happen?
Tenant didn't pay their portion of the rent - why can't PMC go over to property and threaten tenant to get the rent?
Tenant breaks lease early - how did the PMC allow that?
Tenant gets a dog or moves in a boyfriend - why was that allowed?
And on and on and on...
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2 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  9mo
  Quote from @Drew Sygit:
  
  Real problem is not matter how hard you try to properly set their expectations, owners freak out over anything negative!
  Tenant breaks something - why'd the PMC let that happen?
  Tenant didn't pay their portion of the rent - why can't PMC go over to property and threaten tenant to get the rent?
  Tenant breaks lease early - how did the PMC allow that?
  Tenant gets a dog or moves in a boyfriend - why was that allowed?
  And on and on and on...
  
  Yup exactly. This is how owners behave. No clue what type of fantasy James Jones & Leroy are talking about in regards to these owners that try to over renovate their houses lol.
  The people who go on BP to invest in out of state Section 8 properties in the cheapest markets in the USA do so for a reason.....They are cheap. If they weren't they wouldn't be online trying to find the cheapest house in the cheapest city in the USA.
  0 Reply
- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @Drew Sygit:
  
  Real problem is not matter how hard you try to properly set their expectations, owners freak out over anything negative!
  Tenant breaks something - why'd the PMC let that happen?
  Tenant didn't pay their portion of the rent - why can't PMC go over to property and threaten tenant to get the rent?
  Tenant breaks lease early - how did the PMC allow that?
  Tenant gets a dog or moves in a boyfriend - why was that allowed?
  And on and on and on...
  
  Facts. I often explain to clients that a Property Manager is not really in the business of managing structures we mostly manage tenants and tenants are unpredictable. The lower the income the less predictable they become. Many owners expect the tenant to go about life the same way as they do back home in Southern CA, or Miami or even in the UK. That's not a good way to envision reality.
  Owners that cannot understand this become another issue the PM has to manage. We end up constantly putting out expectation fires.
  
  You absolutely can make money in the inner city however you have to prepare yourself for the process.
  0 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
9mo
I've been investing with sec 8 SFR for about 6 years in a bad area. So far so good! The tenants are a little rough on the houses, but the extra money is good. These people seem to stay for years so I'm ok with a little extra damage from their kids or whatever. Most of my sec 8 homes aren't in good shape so I don't sweat the little stuff. These people are just happy to have a free or almost free safe place to live. Mine all have kids and will most likely have their vouchers for many years. I've yet to have a sec 8 tenant move out. My other properties average turnovers every 3 or 4 years which crushes profits. I'd rather have people stay for at least a decade or two so that's why I may shift more of my rentals to sec 8.
0 Reply
- Leroy K. WilliamsPro Member
  OP
  Property Manager · Southfield Mi · Member since 2018 · 182 posts · 171 votes
  9mo
  Quote from @John Morgan:
  
  I've been investing with sec 8 SFR for about 6 years in a bad area. So far so good! The tenants are a little rough on the houses, but the extra money is good. These people seem to stay for years so I'm ok with a little extra damage from their kids or whatever. Most of my sec 8 homes aren't in good shape so I don't sweat the little stuff. These people are just happy to have a free or almost free safe place to live. Mine all have kids and will most likely have their vouchers for many years. I've yet to have a sec 8 tenant move out. My other properties average turnovers every 3 or 4 years which crushes profits. I'd rather have people stay for at least a decade or two so that's why I may shift more of my rentals to sec 8.
  
  You are definitely living the dream as it relates to Section 8 success. The program works. There are people worried about funds drying but if you stay on top of it you will see an evolution of funding for low income housing so its all about staying with the process
  0 Reply

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