37 Unit Section 8 MN

37 unit 100% section 8 building with a HUD HAP contract in Minnesota. This property has been a section 8 building since it was originally built in the late 70s, and has a great housing option for residents needing assistance for housing. This was our first property in the affordable sector of multifamily, there was a lot of lessons learned navigating through the HUD approval process, but are excited to continue purchasing properties in this asset class.

Ownership did not have a local presence anymore, and was starting to downsize their portfolio. Overall the property was operating fairly well at purchase, unnecessary expenses were starting to make the property not perform to it’s full potential. Condition wise, the property was excellent, with over 400k in capex spending in the last 3 years.

This project was a fairly straight forward stabilization for our team. We immediately focused on decreasing expenses, and increasing occupancy.

1. Removed some unnecessary onsite staff
2. Converted one of the apartment units that was being used as an onsite office
3. Converted hallway and exterior lighting to LED
4. Added temperature limited thermostats to save on owner paid heating costs
5. Put in place our management with immediate marketing, and filling vacant units

With a section 8 property, there is a lot of additional income verification and compliance that goes into approving a resident to move in. However once a tenant moves in, they tend to stay longer than a traditional market rate building. Being this is a long term hold, we are excited to provide our investors with a consistent cash flowing asset that also has immediate equity built in.

Hold duration: Long term hold 10+ years.

Purchase Details:

Price: $814,000

Occupancy: 85%

Monthly Revenue: $21,000

Projected Financials:

Occupancy: 95+%

Monthly Revenue: $29,000+

NOI: $129,000

Valuation at 9 cap rate: $1,400,000+

Equity generated: $586,000+