Kay, I read through this entire thread and the replies, and I want to give you a consolidated response because there's genuinely great advice scattered across 18 replies (Eduardo and Richard especially), but also some gaps nobody addressed.
Your Starting Position Is Better Than You Think You lost $38K on flips. That stings. But here's something nobody in this thread mentioned: under IRC 469, passive activity losses carry forward. Depending on your AGI and filing status, those flip losses can offset future rental income for tax purposes over the next 2-3 years. Talk to your CPA before your next move — it changes the math on your first rental deal. That $38K isn't just gone. It's a tax asset sitting in your return.
You also have something most people asking this question don't have: actual Section 8 landlord experience. You had a good tenant in 2021-2022 who left the place clean. You know what good looks like. That matters.
The Honest Math on $20K
I want to be direct here because your follow-up to Kyle about wanting 5% down with 95% purchase and 100% rehab covered — that's not where DSCR lending is in 2026.
- DSCR lenders require 20-25% down. With $20K minus closing costs, you're looking at an ~$80-85K max purchase price.
- Bridge/rehab lenders CAN go lower — 10-15% down on acquisition with 100% rehab financing — but they want track record. Your flip experience (even with losses) actually helps here because you've completed projects.
- Current DSCR rates: 5.99%-8.00% depending on credit score and ratio.
In Elgin/Aurora, $80K doesn't get you much. But here's something specific to your situation: Kane County uses Small Area Fair Market Rents (SAFMRs). That means FMR varies by ZIP code, not just metro area.
For a 3BR in your area, FMR ranges from $1,854 to $2,266 depending on the specific ZIP. Before you go out of state, check what your existing Elgin property could rent for under Section 8. You might already be sitting on a deal with zero acquisition cost.
Where the Numbers Work If You Go Out of State
I pulled the FY2026 FMR data for the markets mentioned in this thread:
┌───────────────────────────┬───────────────┬─────────────────────────────┬────────────┐
│ Market │ 3BR FMR │ Typical Distressed Purchase │ Rent/Price │
├───────────────────────────┼───────────────┼─────────────────────────────┼────────────┤
│ Birmingham, AL │ $1,583 │ $40-80K │ 1.5-2.0% │
├───────────────────────────┼───────────────┼─────────────────────────────┼────────────┤
│ Indianapolis, IN │ $1,907 │ $60-100K │ 1.2-1.6% │
├───────────────────────────┼───────────────┼─────────────────────────────┼────────────┤
│ Cleveland/Dayton, OH │ ~$1,200-1,400 │ $40-70K │ 1.5-2.0% │
├───────────────────────────┼───────────────┼─────────────────────────────┼────────────┤
│ Elgin, IL (your backyard) │ $1,854-2,266 │ $150-250K │ 0.7-1.0% │
└───────────────────────────┴───────────────┴─────────────────────────────┴────────────┘
Birmingham and Ohio generate roughly 2x the cashflow per dollar deployed compared to your local market. That's not opinion — it's the FMR-to-purchase spread.
The BRRRR + Section 8 Combo Works — But You Need to Choose
Eduardo described the model perfectly. Buy distressed, rehab to HQS standard (functional and safe, not granite counters), place a voucher tenant, season 6-12 months, DSCR refi at 75% LTV, recycle your capital, repeat. The S8 angle actually helps your DSCR refi because lenders view HAP income as reliable and consistent.
But here's the thing Richard brought up that I want to make sure you caught, because it's the most important point in this entire thread:
You cannot easily exit a Section 8 property with a tenant in place. The HAP contract doesn't automatically transfer to a new buyer. S8 tenants average 3+ years tenure because transferring a voucher is a pain for them — great for cashflow, terrible for your exit flexibility. And investors buying occupied S8 units typically pay 85-90% of what they'd pay for a vacant unit. You're leaving money on the table at exit.
So you need to decide now: are you holding long-term for cashflow, or are you keeping the option to sell in 1-2 years? Because "Section 8" and "sell when the market improves" don't go together. If you're truly building cashflow and doors, S8 + BRRRR is one of the strongest plays at your capital level. If you want exit flexibility, do market-rate BRRRR and skip S8 entirely.
The Practical Next Steps
1. This week — Call the Housing Authority of Elgin and ask what a 3BR voucher pays for your ZIP. If it's $1,900+, you might S8 your existing property before buying anything new. Immediate cashflow, no
acquisition cost.
2. This week — Start interviewing PMs in Birmingham (or whichever OOS market you choose). The PM IS the strategy when you're investing remotely. Ask specifically: How many S8 doors do you manage? What's your
HQS first-pass inspection rate? Can you manage a rehab? Don't look at a single deal until your PM is locked in.
3. This month — Get pre-qualified with a bridge/rehab lender. Your flip experience (completed projects, even at a loss) is actually an asset in that conversation.
4. Before you buy — Make the hold vs sell decision. Everything else flows from that.
On your deal sourcing concern — you're right that wholesaler margins are compressed in 2026. The investors finding real deals right now are working through PM networks (PMs see distressed properties before
wholesalers), direct-to-seller marketing, and auction/REO channels. Another reason to lock in the PM first.
You've already survived the hardest part — losing money and coming back instead of quitting. Most people don't. Get the PM, get the financing lined up, and let the system work.
