I'm looking at a package of a dozen or so homes in NW St. Louis county. They are all in County, NOT City limits.
Several of them center around Jennings, which doesn't look too bad at Sperling's Best Places
One of them *is* in Ferguson however, and we all know that history.
Avg house price around 40K, avg monthly rent around $750.
All look in decent shape on Google street view. Yards are all mowed, no trash, etc.
Cap rates are advertised 12-13, let's say reality is 9-11, cause sellers usually present blue skies cases. ($750 x 12 = $9000, assume a bad 60% overhead/vacancy, we've got $3600/40K or a 9 cap.)
All but one current tenant are section 8. I would keep prop mgmt in place.
I've been told that the Section 8 gov't agents visit the props periodically, and the tenant can lose their Section 8 if they don't care of the prop, so in theory at least, the tenants have some skin in the game.
On the surface, I've been told by one St. Louis resident to run for the hills and don't look back, don't even consider this deal. It's a very low income/high crime area, St. Louis has perhaps the worst race relations in the country, the Ferguson riots were not that long ago.
On the other hand, the homes do all look good on street view, and I know there are investors out there who have learned to successfully play the Section 8 game and get better returns than buying higher grade properties at the low cap rates available these days.
What is your specific and general advice to do my DD on this, especially if you know the area?
Anyone out there specialize in Section 8?
What steps would you take?
