Section 8 Property Purchase Opinion

[Hai Le]

Hello guys, I'm getting into the Section 8 investing and just wanted some feedback on a property I'm looking to purchase out of state.

4BR 1Bath SFH, Mortgage payment is $917.37/M-$955.12 for a 30YR Fixed Rate at 7.13%, 80% LTV I am putting down $23,800. Looking to structure the deal with concession's to come as little out of pocket as possible so I have different offers in mind, but the payment is between the ranges.

I figure another 20% for Property Management, Vacancy, Maintenance which totals to $1,100.84/M-$1,146.14/M. 

Section 8 Payment Schedule for the 4BR in the location is $1,670/M & the County Housing has a payment schedule of $1,832/M; so net cashflow would be $523.86-569.16/M at $1670/M and $685.86-731.16/M

Property is turnkey is needs just a cleaning for tenant ready. Just wanted thoughts and opinions on this property & deal. It is in a good neighborhood and on a slab so little structural issues to worry about. All big ticket stuff are taken care of & newly replaced.

Thank you for your feedback!

[Drew Sygit]

@Hai Le if only it was this EASY!

1) The $1832 S8 rent probably includes all utilities. Be sure to verify!
Most counties have a chart that allows you to figure out these amounts.

2) 20% for PM, Vacancy & MNT? Way too low!
PM - probably 10%
MNT - should be 10%
Vacancy - everyone thinks it's 5%, but that's only for Class A properties. S8 rentals are Class B, C or D. Should be at least 10%.

3) What about tenant damages and nonperformance?
Most S8 tenants now have to pay a portion of their rent. What happens if they don't?
What credit score do you think tenants qualifying for government assistance will have?

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

You are looking at S8 because you naively think it will solve all your tenant problems.

NOT TRUE!

You will just be trading one set of tenant challenges for another.