Looking for my first investment this year- thoughts on this Ohio property?

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Looking for my first investment this year- thoughts on this Ohio property?

Nikita Sharma
New to Real Estate · CA · Member since 2023 · 7 posts · 3 votes

Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

Thank you all in advance!

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Vadim F.
Investor · Member since 2020 · 337 posts · 213 votes
3y
Quote from @Nikita Sharma:

Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

Thank you all in advance!

 @Nikita Sharma the issue is that you are looking at a property provided to you by a turnkey provider. Also, it depends on what market you are looking into within Ohio and what you are looking to achieve. Is it cash flow or is it appreciation?

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  • Najma Osman
    Real Estate Agent · Columbus, OH · Member since 2023 · 161 posts · 217 votes
    3y

    Hi @Nikita, 

    I invest locally in Columbus. I would say the extent of the deal depends on your goals and where the property is located. There are areas in Columbus where the properties do not cash flow but they have a great rate of appreciation. There are other neighborhoods where your numbers would point towards a bad rate for cash flow. I would love to talk more in depth, I will send you a DM.

    0Reply
  • Vadim F.
    Investor · Member since 2020 · 337 posts · 213 votes
    3y
    Quote from @Nikita Sharma:

    Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

    I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

    I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
    Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

    Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

    I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

    Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

    Thank you all in advance!

     @Nikita Sharma the issue is that you are looking at a property provided to you by a turnkey provider. Also, it depends on what market you are looking into within Ohio and what you are looking to achieve. Is it cash flow or is it appreciation?

    2Reply
  • Nikita Sharma
    OP
    New to Real Estate · CA · Member since 2023 · 7 posts · 3 votes
    3y

    @Najma Osman Thank you Najma! Just replied :D

    @Vadim F. I am looking at Akron, and aiming more for cash flow

    0Reply
  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    3y
    Quote from @Nikita Sharma:

    Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

    I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

    I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
    Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

    Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

    I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

    Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

    Thank you all in advance!


    Hey Nikita! Welcome to bigger pockets!

    I am a local investor and I focused my investments in Ohio market I also have a network of Property Managers, General Contractors, lenders etc that I could highly recommend to you. I also own a few investment properties myself and have done some flips. 

    We could discuss more about this and I would love to help you. Send me a DM. :)

    [email protected]614-412-2912
    Reafco.512 Reviews
    View Page
    1Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    3y
    Quote from @Nikita Sharma:

    Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

    I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

    I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
    Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

    Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

    I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

    Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

    Thank you all in advance!

    Hey Nikita, as a local investor and agent here in Columbus Ohio, I'd be happy to take a look at your deal analysis and give you my thoughts. What I can say is that when the interest rates are higher, it's much more difficult to make deals work in terms of cash flow. In addition, I do have a few lenders who can get you interest rate in the low 6s and would love to introduce you over to them. Let me know if you have any questions or want to connect!










    Hi NAME, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. Just a few weeks ago, I helped a client close on a deal getting them 20% cash on cash return. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!



    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
    WebsiteView Page
    1Reply
  • Vadim F.
    Investor · Member since 2020 · 337 posts · 213 votes
    3y
    Quote from @Nikita Sharma:

    @Najma Osman Thank you Najma! Just replied :D

    @Vadim F. I am looking at Akron, and aiming more for cash flow

     @Nikita Sharma I would recommend searching for properties on your own. if you are going turnkey, your cashflow will be very slim. You want to be able to force equity into your property and set your rents. 

    1Reply
  • AJ Singh
    Rental Property Investor · Orange County, CA · Member since 2016 · 512 posts · 374 votes
    3y

    @Nikita Sharma

    Do your due diligence about the Akron neighborhoods before pulling the trigger. Make sure to get a third party unbiased home inspection if you do go the turnkey route. You can always buy via a local real estate agent and find a local property mgt co. Its not as daunting as you may think. 

    Check the Columbus Ohio market for sure!

    1Reply
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