How are people getting double digit CoC with Section 8 RE investing
I am a REPE buyer and have seen a few Section 8 opportunities come across my desk with fantastic returns (double-digit CoC, high EM and IRRs) all while buying the deal at a 2% or 3% cap rate and adding minimal enhancements to the property. How are these returns being achieved with Section 8, specifically in a location like Los Angeles? I know the program allows for less vacancy, consistent CF at market, but in a place like LA where occupancy rates for multifamily is not an issue, shouldn't the returns then be about the same as a non-section 8 property? There must be different incentives Section 8 owners are incorporating to achieve such great metrics (i.e. tax incentives, allowances, higher rents than market, rent bumps, etc.) I am new to this investment strategy, so would appreciate some insight from someone familiar with the space.
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