Buying HUD Homes

Thank you for the info! Looking at making an offer through my LLC. This would be my first attempt at a flip.

Im actually buying 3 section 8 homes right now, the closing is next friday ill let you know how it goes. I asked my realtor of the approval process and he said he would handle everything and fwiw he got the seller to pay for my home warranty. One of the homes has a hole in the wall in the mast bedroom, a big one, not sure if im going to have to fix it or not, but if there is no inspection from the section 8 inspector then I wont be doing it. I am a bit worried bc the guy wanted $195,000 for the 3 and I offered $150k and we're closing at $161k. The 3 rents Im getting are $932/mo and will be rising to $1,070 in september from what I understand. Im still nervous bc I dont know why someone is so willing to let go of a 20% cap rate investment in this low rate environment but who knows. If section 8 doesnt work out, I can use them for my employees so I have a back up plan. Hoping its a headache free 20% annual return haha.

I've bought 2 HUD homes and there's nothing different to you an I. Closing can take longer and sometimes offered from people who want to owner occupy will be excepted before investor offers.

We bought one at the end of last year. Since it was in the owner occupant period, we have to live in it a year before selling. It's a bit of a pain to get utilities turned on for inspections. We had to get authorization and they could only be on for 72 hours. Also, our lender required us to give them an inspection report and nitpicked about every little thing. They wanted repair quotes on every single issue the inspector found and wanted us to put money in escrow to pay for it. We ended up getting them not to escrow the money so that saved some aggravation.

What kind of employees?

no no there are tenants in place in all 3 homes, they're side by side townhomes that are currently at $932/mo and in september rise to $1,070/mo. I've never dealt with section 8 before or its tenants. A realtor I buy my properties from came to me with this like 2 weeks ago and thought it was a steal and frankly it is. The checks come from the government every month I dont have to do anything. Still trying to wrap my head around why the seller would want to sell these but who knows. They're 1700 sq ft 3 bedroom townhomes. He was asking $195,000 for the 3 I got them for a hair over $160k. I did inspections and very few minor things nothing major. The only major thing was the giant hole in the wall in one of the master bedrooms but for what I paid which is like $54,000/home I dont mind if I have to repair it. The tenants have been living with it so unless Section 8 authorities tell me I have to fix it I wont. Im sure though that when a new owner comes in they probably inspect properties again but who knows our government is kinda useless when it comes to things like this.

My closings are this friday ill let you know how it goes, the realtor says its simple to get the checks transferred into my names and he's handling it, he's a good friend of mine for many years no need for him to BS me.

Of course the tenant quality is low, its government supplied, but if it is, when its time for leases to be up ill end it and either lease them to some employees of mine or just lease them to normal people I can screen, actually saw the area other similar places are leasing for $1,200/mo or so but these are already in place and $932-1070/mo puts me at near 2%/mo which almost impossible to do in real estate so I cant complain at all. I know the upside is zero in terms of capital gains but these can be cash cows.

Just curious do any of you know a good site to buy section 8 housing? Im really intrigued by this all, Im hoping this goes well and I can find others, I dont mind my return on invested capital being 20% so Id love to look at some others, not sure where to begin the search though? Are there big buildings of section 8 for sale? Other multi unit opportunities like I paid? Is 20% the typical cap rate for section 8? I have a ton of questions and my realtor didnt know bc its not really his thing, just a one time deal that he came across while looking for stuff for me.

I've said this in another thread, but the best place to find section 8 and hud housing are the Alex built large townhome, condo, and apt complexes that flopped when the market crashed. The stuff that was selling for $120-200 during the bubble and now going for $50-80k.

I don't think you will find much with section 8 tenants because anyone that has done the work to get qualified are most likely in it for the long haul.