Buying your first Section 8 investment property

Step 1: Find your area

1. So the first step to getting a section 8 investment property is picking your location.

2. At the start I would reccomend sticking with 1 area so you can learn the process. Once you have the process down you can branch out.

3. Look for a landlord friendly state, where you can commonly find properties sub 100k, you can find these by asking the Section 8 AI.

4. You want to go with a popular city, for example Saint Louis, Kansas City, Birmingham, etc. If the city is on the uprise that is even better.

5. We dont want small cities or the market will be slow and you'll just be waiting, then itll take longer to get tenants in.

6. The main thing i'll be looking for is the potential returns of properties in them specific cities, we can check this with the FMR page and the Calculator page.

7. If a city has good returns, is landlord friendly and has sub 100k turnkey properties, then thats a great city.

Step 2: Setting Up your LLC

1. Once you have found the city you would like to invest into, then you can create your LLC within the same state.

2. You always want to setup a new LLC in each state you're looking to buying, make sure your properties are owed by an llc in the same state as the property, that way we dont need to foreign register the LLC.

3. When creating a LLC I use a website called Inc Authoriy, as I find them the cheapest. There are lots of other websites, once again you can ask Section 8 AI.

4. Go through the process, you dont need any of the added extras they offer, if you dont live in the state, you will need a registered agent, and possibly a virtual mailing address depending on the state, you can either get both of these via Inc Authority, or you can do your own research and look elsewhere.

5. Once you have your LLC setup, you will need to write up a operating agreement, we do sell operating agreement templates, or you can create your own, it essentuily focuses primarily on ownership, management, and financial matters, it lays out the strucutre.

6. Next you will need to register for a EIN Number, this is basically your LLC's version of a SSN. You apply for this directly on the IRS website, if you need help Section 8 AI can help you, or there are lots of YouTube videos. https://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number

7. You will need to file your benficiary of ownership. This will be you reporting it to the IRS, this will define who owns what withn your LLC. Once again Section 8 AI can help you, or lots of YouTube videos can. https://www.fincen.gov/

8. Next you will need to setup a LLC bank account, you can choose any bank you feel comfortable.

9. You should be good to go, you have your LLC registered, if you dont live in the state, you should have a registered agent, depending on the state rules you might have a virtual mailing address, you should have your operating agreement written and signed, you should have your EIN number, you should have your BOI filed.

10. If you want a added extra (not a requirement), you can get your certificate of good standing, this is something the real estate agent, lender, title company, etc, might ask you for. You will need to get this directly from the website of the state that your LLC is formed. If you need help Section 8 AI is there.

Step 3: Find your real estate agent.

1. Finding a good agent isnt always easy, the more you do it though, the easier it gets, you just need experience in this game.

2. When working with a agent some will require a exclusive contract, meaning within that city you can only work with them, this is fine to sign as long as you know how easy it is to get out, for example if youre locked in for a time period and no way to exit, dont sign with that agent, but the agents with exlusive agreements usually allow you to leave at any time just with a text message, if theyre not working how you want them to work. Exclusive contracts are not for all agents so if you dont like the idea of exclusive you can skip these agents, or even ask for more details to change the contract.

3. You want to hire slow and fire fast, if the agent is giving you issues or a hard time get rid of them, and move on, time is money

4. When you find someone good in this industry, you will want to use their connections, for example if you have a great agent, but a not so great of a lender, your agent will probably have connections to great lenders, so the goal is to get rid of all the mid/ bad people, and get the connections to the best, this just comes from time and experience.

5. My agents will view properties sometimes same day depending on the time, if not next day. The viewings shouldnt be later than the next day, if they are your agent is slow. You need a agent that is happy to put in a lot of offers, my first agent was unhappy to put in a lot of offers so we switched and now i have agents who can write up offers in 10 miniutes. Your agent should be happy to negotiate, even if it isnt price you can add certain things like geting a repair, asking them to install a fridge, oven etc. Also make it clear you're new, so for the first property you kind of need your hand held through the process and everything explained, make sure he explains it all to you, if you just let him do the work with no explnation youre never going to learn.

6. When looking for good agents its really about screening the agents, making it clear to them what you need from them, can they do this, make it clear if they say they can't, its no hard feelings, you dont want your time wasted, or their time wasted, so best to be honest from the start. Speak to at least 3 agents, maybe 5, tell them what you want, see if they can provide what you want, look at their reviews online, and try out the best, always be ready to switch.

7. Final tip, this is an investment, if you know someone in the area who brought their own house, you dont want to just go with their agent because he said it was good, this is an investment property, this is different, find a good agent, look for good reviews, screen them and make sure your minds aline. The biggest thing is word of mouth, if you know another investor in the area you can reach out to him and ask who is good.

Step 4: Find a lender.

1. So when looking for lending we have multiple ways about going at it. The most common way is DSCR loan. A DSCR loan is a loan where in short they look at the income possibly generating by the property, then how much your operating costs will be, so with this type of loan they dont care about your income or tax returns, they just want to confirm the deal will be profitable and you'll be able to pay the monthly payments. DSCR loans commonly are 20% down, you can find lenders with 15% down, and even 10% down, these will have higher rates, but it might be worth it to you if your goal is to build that portfolio, these lenders are also harder to find. DSCR in my opinion is the way to go if you already have some cash. When looking for lenders they will usually do a soft search and pre approve you, if they say they are going to do a hard search dont use them.

2. If you dont have much cash you can do a seller financing deal, this is a deal where the seller provides you a private mortgage, with very little down, sometimes even nothing down, this will get you a property, but your cashflow wont be high, with seller finance if you get the deal correct you can refinance into a dscr loan in the future to get the rates back down. It'll be harder to find a seller who is willing to finance the deal themself, but you can find them, usually the seller will be an investor themself.

3. Next you have conventional loans, which i personally wouldnt reccomend at all, due to you being limited to how many you can get, its based on your monthly income, and it'll affect your credit score.

When i first started my goal was to gain experience and build history, with that history I can start working with OPM (other peoples money), then I wouldnt need to put the funds up myself. I did have cash to start from my other business, so I started with DSCR. In short if you have a good bit of cash I'd use DSCR, if you have very little cash look for seller financing.

4. Once again tell your lender your expectations, find out how long he closes in on average with dscr, tell him your new, ask him to hold you hand along the first property keep you updated on everything, ask for fees upfront, ask him to teach you the wording etc, the biggest thing here is knoledge, once you have knoledge, connections and history in this game, then you can utilise OPM.

5. Finding the specific lenders is just about calling a lot of places, getting pre approved, and findind the rates out that that offer you, rates will be based on your credit score and current market rates.

6. Your funds will usually need to be seasoned for 30 day, meaning you need the funds just sitting in the bank, the downpayment closing costs, and a little on top, you'll need to speak to your lender about specifics.

Step 5: Find a property.

1. Your agent may be sending you properties, but really you need to be the one looking for these properties, check zillow, realator, twice a day, keep up with all the new listings, keep up with the price changes, learn your area.

2. For that first property you really want turnkey (Rent ready), that way you dont face more issues than you expected. Start looking for turn key within your price range, once you have found something you would want to check the google street view, see if its a nice area, check the roof on street view, check everything, does there look like theres any issues, if there looks like minor issues tell the Section 8 AI the issue, the sqft, rooms, house type, area, and ask for a quote to repair. Look for flood risk and wind risk etc. Look at the basement for damp, the basement doesnt need to be finished, it just needs to not be falling apart.

3. Go onto the Crime page and put the address in, this will show you all recent crimes in the area, there will always be crimes in a city, the main thing is the crimes specifically on the road that the property is on, if there isnt then it doesnt look too bad of a road, you can also gage this by google street view.

4. Once you have found a property looking good, then you can search the zip in the FMR page, copy the rent into the calcultor page, and workout your cashflow %, cashflow % is basically how much profit youre making per month of the house value, that way you can see how fast you can break even on your downpayment, for example if youre making 1% return, with a 20% downpayment, in 20 months you'll get your downpayment back and break even. The cashflow 5 is the main thing I base all of my deals off of.

5. Next thing is working out how much you want to offer, you can discuss this with your agent and base it off of your calculations. Something to remember, once your offer gets accepted, after inspection you can always counter offer for a repair to be made by the seller, for them to add something like a oven and a fridge, or for them to drop the price a little. Since you're already far into the deal they usually will accept some form of counter offer.

Step 6: Close on the property.

1. Once your offer gets accepted, you will put a earnest deposit down, this is basically a deposit to show your serious, this will go towards your downpayment, and the money will be held in a escrow, this is refundable, but confirm with your agent. I usually put 1% down, or 1k down, whichever is more.

2. Next you want to get an inspection of the property, this isnt a requirement, but I heavily reccomend doing so.

3. After inspection, if everything is good, and if youre happy to procede at the same price you can. But if something pops up, you can ask the seller to repair it, lower the price, maybe add something like a fridge and an oven, this is the final point to really get as much out of the deal as possible.

4. Before choosing a closing date speak to your lender, see if its realistic, confirm your money will be seasoned in time, I also put my agent and my lender in a group chat together.

5. Once you come to an agreement, and have sign the contracts, you then get an appraiser out there to appraise the property value, this is something that is usually required by the lender to fund the deal, if youre doing convential or DSCR.

6. Next you'll need to find rental single family home insurance, shop around, find the best price. Yo'll need this in place before closing, find good reviews, dont just take the one your lender reccomends.

7. Keep on top of everyone, your agent, title, your lender, confirm everything is moving and you'll close on time

Step 7: Find a property manager.

1. A property manager is very important. Do not manage these properties yourself, focus on scaling your portfolio, funding, knoledge, etc. Dont waste your time managing these properties for a little extra cash.

2. You should be looking for a property manager whilst closing, get one ready before closing on the property.

4. Call around, ask for rates, read reviews, reviews word of mouth is the most important, if you have a good agent he probably knows good management companies in the area.

5. Make sure they have section 8 properties right now, and are well veresd in section 8.

6. I prefer bigger companies because they usually are more likely to have in house maintiance, know how to pass a section 8 inspection, know more about section 8, and have a lot of connections in the area.

7. 10% of the rent is the standard rate these management companies charge, they may also charge you the first months rent to find and screen the tenants for you. I would be looking for companies within this margins, or asking for less, dont go above 12%.

Step 8: Find a tenant.

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Step 9: You now have your first property.

1. Well done, you have your first turn key property, and you have gained a lot of knoledge.

2. The second property will be much easier than the first.

3. Before looking to venture into other ways to scale, i reccomend getting 2-3 turn key properties, that way you get the process fully down, and have a good team.

4. Now there are lots of ways you could look to go in the future, continue buying turn key with your own funds, partner up with investors and use their funds, look to get some credit card stacking funds, look into BRRR (Buy refurb refinance rent repeat) by doing that you usually can pull out your downpayment and not run out of cash. You have a lot of ways about going forward.