The reason I say specifically Section 8 is bc you’re buying dirt cheap w minimum down and locking in that CF. But basically loading up the house w a shitton of debt, minimizing the cost, using the CF to pay off the debt, and hopefully the house is worth a little more when you wanna get rid of it. About 20-30 % IRR from what I’ve seen.
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Based on the most helpful WSO content, Section 8 real estate investments can indeed resemble private equity strategies accessible to retail investors. The approach you described—acquiring properties at low costs with minimal down payments, leveraging debt, and utilizing cash flow (CF) to service that debt—aligns with a value-add strategy often seen in real estate private equity.
Achieving 20-30% IRR in Section 8 investments is ambitious but not unheard of, especially if the following factors align:
However, it's essential to note that such high IRRs often come with increased risk, including: - Market volatility. - Tenant management challenges. - Potential regulatory changes affecting Section 8 programs.
This strategy mirrors private equity principles by focusing on leveraging debt, optimizing cash flow, and targeting value appreciation for outsized returns.
Sources: Real Estate Private Equity Technical Qs, Real Estate Interview Questions Master Thread, Real Estate Interview Questions Master Thread, Modeling Question: IRR goes down but CoC goes up over time
Yes but you're dealing with Section 8 tenants
countless videos of what having s8 tenants look like when the tenant leaves and you need to clean fix the place up to get a new one. if it was painless it would be saturated. the home asset is destroyed. If you have a long term vision of the land as an asset its a different story.
How are you estimating 20%-30% IRR from 4%-6% cap rates?
Says who?
How is this any different than any other form of commercial real estate? Yeah, you can get higher leverage. You also should have more consistent and predictable cash flows to pay for it. Rather than viewing it as buying a physical structure, you should think about it as if you're buying the contract.
Have you actually seen this? Without more detail it is a meaningless number - you may be (or work for) a slum lord and thus might not actually be the best source on this.
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