Buy and Hold - Rent to Section 8 for CashFlow Strategy

[Craig Barrett]

Investment Info:

Single-family residence buy & hold investment in Dale City.

Purchase price: $163,000
Cash invested: $33,000

Mortgage has ranged from 975 to 1073 i have rented this property from 1575 to 1650. I currently rent the property at $1614 and pay 1073 for the mortgage. I developed a strategy to use Section 8 exclusively which guarantees income. This is particularly important in a down economic cycles when unemployments is high -- like during the COVID pandemic. Currently the backlog of Section * eligible tenants in Prince William County is 11k. Thus, the demand out paces supply; and the income is guaranteed. Some tenants are required to ay a portion of the rent, but you can collect a security deposit to mitigate the risk. To date I have had 100% occupancy. one Tennant caused significant damage but the total cost of repair was only 3
$3 k and that was mitigated by her $1575 security deposit. The Average $500/month positive cash-flow is worth the risk.

What made you interested in investing in this type of deal?

I was looking for cashflow and building a real estate portfolio.

How did you find this deal and how did you negotiate it?

Conventional: used an agent, saved the deposit, got a mortgage with a conventional bank, repeat.

How did you finance this deal?

Mortgage with conventional bank 20 percent down 5% interest.

How did you add value to the deal?

Compared mortgage with the rent comps. Based on the down payment (plus other out of pocket expense) the positive cashflow made sense. Also, the tax advantage, and the appreciation

What was the outcome?

(property now valued at $273k outstanding mortgage $110k). Currently rented to a section 8 tenant at 1614, the County pays 1137 and the tenant pays $477.

Lessons learned? Challenges?

Invest the time to vet prospective section 8 tenants. The time invested my result in thousands of dollars saved. Recommend using an tenant evaluation app by TransUnion there the tenant actually pays for the application and the company does the full background check. considering the vast pool of tenants you can choose to be picky.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I did.