What made you interested in investing in this type of deal?
Section 8 was my goal the entire time. My other tenant in my other unit stopped paying rent in November, so I wanted a secure government payment.

How did you find this deal and how did you negotiate it?
MLS. I had looked at this property 7 months earlier, list price 79k, offered 65k, got rejected. After I completed my first deal (which is just around the corner) I was not surprised this was still on the market. New list price 75k, offered 64k, finally agreed on 66k.

How did you finance this deal?
Self-Directed IRA. 100% purchase + 100% rehab.

I rolled an old 401k over into a checkbook controlled Self-Directed IRA LLC. I used Safeguard Advisors to set all of this up. This took several weeks to complete. Highly recommend Brian Eastman with Safeguard Advisors.

When you purchase real estate through a SDIRA, everything must be completed inside the LLC entity. This is quite challenging. All closing costs, insurance, rehab expenses, utility bills, everything; as well as the incoming rent must be held in that separate bank account. No co-mingling funds. Also you (or any family members) are not allowed to perform any sweat equity rehab work on the property. Everything must be subbed out to contractors. If you fail to do this the IRS may penalize your IRA for 10% early withdrawal (prior to 59.5 years of age) as well as other fines.

Rehab completed?
Added 1/2 bath, new LVP flooring, new roof & skylight, new electric panel, furnace and HWH (removed failing chimney went electric HWH). Fresh paint, door hardware, outdoor railings, new SS kitchen appliances, small granite counter, backsplash, used washer/dryer. Extensive waterproofing in basement. All rehab was done with a Section 8 tenant in mind. No dishwasher, no garbage disposal, no ice maker, vinyl mini-blinds placed on all windows, basic lighting and fixtures.

If I was flipping this unit I would have gutted the kitchen and bath, added A/C, finished the basement, higher level of finishes, etc.

Saved money by keeping the existing windows, kitchen cabinets, original doors.

Opted not to do A/C due to re-ducting cost. Estimate ~10k to do this versus $100 additional rent. ROI break-even was 100 months (8+ years). Therefore decided tenants can provide their own A/C window units.

Lessons learned? Challenges?
Permitting process is a challenge. This added several weeks. When we pulled a building permit for the 1/2 bath, there was 3 different rough inspections and also 3 different final inspections (electric, plumbing, building). Contractors were also overbooked and timelines slid A LOT. Holidays, Covid and foul weather did not help. Rehab was completed in about 20 weeks (10 weeks planned). I can & will do better next time.

Lots of other inspections. Lead certification, Baltimore city rental inspection, Section 8 inspection. Each came with punch list items to address, adding to the delay.

I hired a great listing agent for tenant placement and navigating the Section 8 onboarding process. I'm currently doing the PM myself.

Finding a Section 8 was harder than I imagined. Took about 2 months. Tenants can be picky and having no A/C was definitely a minus.

My Section 8 tenant is paying $51 out of the $1350. Uncle Sam is paying the other $1299. Wow!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I used @Brian Eastman for the Self Directed-IRA. @Stephen Kehoe for tenant placement. My real estate agent was @Joe Norman.

I would recommend all these folks to anyone. They are all very good at what they do.

Plans for property?
I may refi in 12 months with a non-recourse loan. Non-recourse is required for the SD-IRA. Rates and terms are not as good as conventional loans. Looking at 60% LTV and around 7% rate (20 yr fixed), 12 months seasoning. [Some banks that handle non-recourse: Titan, Solara, First Western]. I'm still on the fence about this. With rising property values, I may consider selling. I like the idea of using my SD-IRA in other ways, like being the bank & lending to other investors.

Plans for me?
I'm still licking my wounds from being screwed by my 1st tenant who I just evicted. Covering that mortgage is not fun. That is tied up in court as I'm owed almost $12k. Learning lots about the court system. I'll be looking to turn that 1st unit over into another Section 8 tenant in the near future.

Here are some before pix from my second unit: