#157: 100% Section 8. 22.6% CoC. Seller financing. KC 8-unit

OPPORTUNITY

Conditional buy for an OZ investor deploying capital gains with a 10-year hold conviction - demand the cap rate explanation, secure the Fannie Mae loan note before LOI, implement RUBS at close. Verified 2025 NOI of $175,823 at 100% occupancy with $500K in documented 2024 capital improvements and an unimplemented RUBS opportunity adding $28-38K to NOI on Day 1. Houston Fifth Ward sits 1.5 miles from EaDo and directly in the East River 150-acre mixed-use development corridor. Opportunity Zone designation eliminates capital gains tax on appreciation for 10-year holders, and a Fannie Mae assumable loan from 2023 at a pre-2024 rate may be the only thing that converts this from cash flow negative to positive.

RISK

The 10.77% stated cap rate requires $376,950 in NOI versus $175,823 verified in 2025 actuals - a $201,127 gap with no clear explanation from the OM. The deal is cash flow negative at conventional financing (-$23,329/yr) and requires both loan assumption AND RUBS implementation to reach positive cash flow. 1955 construction needs a full property condition assessment beyond the cosmetic 2024 renovation.

VERDICT

Conditional buy for an OZ investor deploying capital gains with a 10-year hold conviction on the Fifth Ward and East River corridor. Get the full Fannie Mae loan note upfront, demand a reconciliation of the cap rate discrepancy from the broker, implement RUBS at close, and commission a property condition assessment on the 1955 mechanical systems.

OPPORTUNITY

Conditional buy - confirm asking price first, negotiate seller financing terms in writing, verify Jackson County assessed value, and get a contractor bid on the basement unit finish. At or below $600K with reasonable seller financing terms: buy. 2023 down-to-studs gut renovation covering every major system - roof, plumbing, electrical, HVAC, flooring, and security cameras - eliminating capex risk for the next 7-10 years on a 100% Section 8 HCV 8-unit where 70-80% of rent arrives from KCHA on the first of the month. Seller financing at 30% down removes bank timing entirely. Two fully roughed-in basement apartments need only finish work - $70K investment creates $146K in asset value and adds $21,600/yr in additional HCV income.

RISK

No asking price published - this is the first due diligence action item. Electric heating in KC winters adds to tenant utility burden, and shared 100-gallon electric water heaters add owner utility cost. Basement unit activation requires egress windows per Missouri code, finish work, and KCHA inspection approval before generating income. Jackson County property tax reassessment post-renovation may be significantly higher than the pre-renovation bill.

VERDICT

Conditional buy - confirm asking price, negotiate seller financing terms targeting 5-6% rate and 30-year amortization, verify Jackson County tax assessment, and get a contractor bid on the basement unit finish including egress windows. At or below $600K with reasonable seller financing: buy.

OPPORTUNITY

Buy at either cap rate - 8.86% for a self-managing operator or 7.37% for a PM-dependent buyer. Stabilized, honestly marketed Central Mesa 9-unit with real Phoenix appreciation upside and capex-completed mechanical systems. Matthews disclosed both cap rates - 8.86% self-managed and 7.37% normalized - the most transparent financial presentation in this issue. Three triplex buildings on a quiet cul-de-sac in Central Mesa with private yards, carport parking, and W/D hookups on all nine units. All three roofs replaced 2018-2021, HVAC majority replaced, plumbing upgraded. The self-managing buyer captures 10.8% CoC Day 1 on stabilized Phoenix metro income with a 19.60% levered 10-year IRR and 4.94x equity multiple as the long-game.

RISK

Current rents are $84/unit above the comp average - verify the private yard and canal access amenity justification holds as six of nine leases roll in 2026-2027. T-12 maintenance at $429/unit reflects personal owner labor rather than professional management costs. 1970 construction warrants a full property condition assessment on electrical and foundation despite the major capex already completed.

VERDICT

Buy at either cap rate. Verify the 2026-2027 lease roll plan, confirm amenity justification for the above-comp rents, and close. Stabilized, well-maintained, honestly marketed Central Mesa 9-unit with real Phoenix appreciation upside.

OPPORTUNITY

Buy via conventional 5% down. Scenario A (owner in studio, $3,293/mo effective housing cost) is the mathematically optimal house hack. Verify rent roll, confirm studio ADU Certificate of Occupancy, and close. Three genuinely distinct units - 3BD, 2BD, and newly built studio ADU - at $1.095M, well below the 5738 Meade Ave alternative at $1.449M, with the same 3-unit owner-occupied structure. Regardless of which unit the owner occupies, the monthly premium over renting your own unit is identical at $1,743/month. Five off-street parking spaces, Balboa Park proximity, and a newly built ADU likely exempt from AB 1482. By Year 10 the owner approaches living for free while holding $1M+ in equity on an $87,600 initial investment.

RISK

FHA self-sufficiency test fails for this property - 75% of $6,495 gross equals $4,871 versus $8,495 required PITI and MIP, meaning FHA requires the buyer income alone to qualify. Conventional 5% is the correct path. Public rent roll data is inconsistent across sources - request actual lease documentation before closing. Confirm the studio ADU has a valid Certificate of Occupancy before banking on that income.

VERDICT

Buy via conventional 5% down. Scenario A with owner in the studio produces $3,293/month effective housing cost. Scenario B with owner in the 2BD costs $650/month more for meaningfully better living space. Verify the rent roll directly, confirm the ADU CO, and close in whichever scenario matches your life.