Section 8

[Andrew Martel]

Morning BP,

My question today is about section 8. I picked up the S8 Bible VI&II the other day and found it to be a rather interesting read.  A local investor turned me on to it saying that he's followed the same methodology as McLean and absolutely loves it.  He buys homes on the cheap... 15-20K fixes them up to the minimum standard for S8 and pulls a check from the gov for the next year.  He claims that he's had very little issues with the properties because he screens his tenants thoroughly.

All that being said, I don't really see much on BP about this strategy.  As a beginning B&H investor, wouldn't this be a decent way to start off, especially if you paid cash. 

For example:

Buy a home at 15k put 5-8k into it for repairs. Rent the home for 600. Lets say S8 give yous 500 of that. The tenant is responsible for the other $100. Assuming 100/month for taxes 10% vacancy rate, and 5% repair costs thats roughly 330 Net a month or 19% CoC. If the tenant doesn't pay, you're not out an entire months rent because you've got the check from the governement. You can still go after the tenant for the money and you have a little more leverage because you can use the Voucher to your advantage (evictions= tenant loses the voucher).

If you've gone through and done some due diligence in regards to removing "problem areas" for repairs (ceiling fans, etc..), wouldn't the likelyhood of repairs be reduced?

So what am I missing on Section 8? I've always gone by the old adage of "if it sounds too good to be true it probably is". So what are the serious Cons? I know about the potential terror tenants who destroy the property, but that can occur anywhere right? Proper screening takes care of that issues. What about financially? Are banks less likely to do a LTV on a property with S8? Some of the home I've looked at here in my are are distressed, selling for 15k or so, but rehabed values is ~40K. So what am I missing? Why would this be a less desirable option than "traditional" renting?

As always, you guys are great and thanks for your responses!

-Drew