House In Low Income Area
We have been looking at apartment complexes and found that the best cash flow is on a 15 unit building. The building is in excellent condition with a new roof, www.paint.etc. The cash flow is about 4,000 after everything, expenses, vacancy rate. There is a waiting list to get into the building. The only problem is it is in a low income area. Our realestate agent was talking about converting the units to section 8. What would be the downside of this? We need to decide quickly. I would love to hear what everyone thinks of this. Thanks Lisa :-? :-? [ Edited by toolittletime on Date 03/26/2004 ]
Need a little more info to fully assess. How much is the unit, how much down, 4000/month or 4000/year??
Section 8 has it's good and bad points, need to read up on the details (I'm working on getting a few on my properties as section 8). Section 8 is no different then anything else, you set the rents, deposits, accept applications, they sign the leases. With sec 8 (once approved) you have an additional "pool" of folks to chose from. As far a low income goes, no problem - many folks make good money investing in low income areas. However, nothing beats you own research, after all you know your area better.
okay...the price is 780,000 we will put 25% down. There are fifteen units all are 550.00 a month. I had my mortgage person do the math and she figured expenses at 35%.(i think)
We will use an adjustable mortgage starting at 4% or possibly fixed with less cash flow . None of the units are section 8 at this time. The seller said it has real good tenents, but that's what I would say too! Well, thanks for the help! Lisa
I think your numbers are a bit off. Payment on a 600k note should be around 4300/month and once you add in vacancy, taxes, insurance, and maint you are looking at a positive cash flow of only around 1500/month which is a fairly low return for your investment. You would need to get significant appreciation for this to work in my books.
BTW I would NEVER use a real estate agent as someone to bounce numbers off of, they make money ONLY IF YOU BUY. I'm not saying anything bad about agents, I have several who are great, but their interest lies in the sale.
Additionally if this is your first deal, get compentent advice from someone who does not have a vested interest in seeing the deal consumate.
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Hope this Helps!
Bill[ Edited by telemon on Date 03/26/2004 ]
Does he have his records of past cashflow on paper?
And with section 8, we have had great tenents. Normaly, the county makes the rules. And they must follow rules, the rules are like you must pay your rent on time and anything, rules that work in your favor! if they don't they lose section 8, so they paid rent on time. You just two checks one from the county and one from your tenents. Equal to your rent.
I know at least in my state, you don't have to "convert" anything for section 8. You can have tenents on section 8 and not on it mix in the same building just want to clear that up.
Lance
In our area, Section 8 guidelines require a proper inspection. If this building can 'pass' inspection you must be prepared to effectively screen your incoming tenants. Rent payments are timely, but in general, property wear and tear can be impact the cash flow in these areas.
Review your cash flow on this deal and speak with other investors in the area.
Eric & Rosa
[addsig]
This afternoon I had a friend (realtor) do the numbers for me and he came up with about the same figures as you...I just don't know where to buy. I have owned a four-plex and a single family rental in the past, I want to find an area to buy with better cash flow. I live in California but am thinking of looking in another state. Texas? Florida??? I have about 55 days to look because my money is in a 1031 Any ideas?? Thanks to all for the advice
