Questions about Section 42 Existing apartments for sale

[Dan Kennerson]

Hey BP!

I'm looking at an apartment building in a decent area (B/C class but well maintained, clean, and friendly small-ish town) and I'm trying to find the catch. 

I found this BP post which led me to this document, which lined out some of the realities behind the tax credits and repositioning opportunities, but I'm a bit perplexed by this property still. 

Frankly, it looks like too good of a deal, and I'm trying to understand why. It's fully occupied, generating about 1.6% of its' asking price in monthly rents, and has a waiting list of prospective renters that could fill ~35% of the units. No notices given in awhile either, so people are obviously happy to stay there, and rents are being collected. 

It has a required reserves that can be built up over the course of 10 years, and aren't a big deal. It has one person on payroll at a decent pay rate, but it's a large enough building that that salary doesn't make a big dent in cash flow. Maintenance, landscaping, etc. are all outside contractors and reasonable rates. 

I guess I'm trying to figure out what I'm missing, It's not often that a property comes up for sale on a 17% Cap rate that doesn't have serious issues, but I am not finding the issues. 

Are Section 42 buildings a big hassle in paperwork? Audits (which I know happen every 3-5 years)? tenant screenings? 

Thanks for any and all insight!