First Rental: Section 8

[Dominic Eickert]

Hey everyone! I am fairly new to BP and this is my first post! My wife are looking at potentially buying our first rental property but its not a typical scenario and would love some insights.

So this property is in a low income neighborhood and the current tenant qualifies for Section 8. She has been in this house for 3 years and the seller has never had a problem collecting rent from her. The area overall has very little tenant turnover, but I have some reservations about jumping into low-income housing due to the stereotype that there may be more potential for property damage. In addition to the low turnover I do like the fact that at least 60% of the rent is guaranteed to be paid each month!

The purchase price is $129K (there is ~$5,000 worth of rehabbing that would need to be done at the next tenant turnover, mostly cosmetic, so we are going to try and negotiate the purchase price down), a conservative 3% or $3,800 for purchasing costs, last years taxes were $925/year, insurance is ~$1,000/year, and tenant pays all utilities. With 5% cap ex and 5% vacancy (although also probably conservative) and using the BP rental calculator it should cash flow ~390 and a 15% CoC ROI.

Everything is saying this should be a really good deal and I don't want to get caught up in analysis paralysis. Any comments are greatly appreciate!!!

- Dom