“Section 8 is not guaranteed income, and it’s not as easy as people believe," warns Ian Watts, real estate broker with Pierson & Company in Detroi and an investor and consultant to national and international real estate investors.
“Interested buyers are shown the cash-flow returns, taxes and management fees, but rarely shown the vacancy rates and maintenance fees involved,” says Watts. “Many international buyers believe it’s easy to buy an affordable property with a sitting Section 8 tenant and just forget about it. That rarely works out.”
Houses with occupied Section 8 tenants often have to wait between 90 to 120 days before receiving rental income, warns Watts.
Interest in the Detroit market has peaked since the city announced bankruptcy earlier this year, with Canadian buyers snapping up low-cost properties. According to real estate experts on the ground, Canadian buyers are spending between $40,000 and $50,000 on homes, with Rosedale one of the most sought after areas.
Watts says he has had four interested Canadian buyers in the last seven days. “Some investors think it is Christmas here with all of these low-cost properties. I always advise clients not to rush into the market and don’t believe that everything is rosy and great,” he warns. “Many properties need renovation and a lot of maintenance work and you really need a good property manager or partner on the ground to keep that property occupied all year round.”
Aside from Section 8, Watts says the rental market remains strong with many of the city’s residents unable to source mortgages. “There are plenty of opportunities in this market but buyers need to do their due diligence and consider all options, not just Section 8.”
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