Purchasing Your First Out-of-State "Turnkey" Rental Property

Member since 2020 · 43 posts · 22 votes

Good Morning,

My name is Adam Eckhoff, commercial appraiser in New Jersey. Quick question for you all... Let's say I search for a $200,000, 2-unit duplex, on Realtor.com located in let's say Columbus, Ohio. Hypothetically speaking, let's assume the duplex generates $500 per month in income (after expenses, management, etc..).

Why would I not just pull the trigger and purchase the property, assuming I can find a management team to take care of it.

How would i get money back out to purchase another property (how could i leverage it). Do i just save the $500 a month and use that to purchase another one down the road (assuming i living in a perfect world with no repairs/reserves/ cap exp..)

Thanks,

Adam.

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Michael Dumler

Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes

@Adam Eckhoff, I know this is a hypothetical scenario, however, this deal doesn't exist unless it's located in a D-class war zone. If you acquire the property at market value, you can't pull any of your money out because the deal only has X% equity. Only buying well below market value or implementing the BRRRR strategy allows you to recoup your capital.

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Michael Dumler
Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
2y
@Adam Eckhoff, I know this is a hypothetical scenario, however, this deal doesn't exist unless it's located in a D-class war zone. If you acquire the property at market value, you can't pull any of your money out because the deal only has X% equity. Only buying well below market value or implementing the BRRRR strategy allows you to recoup your capital.
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Cole Booth
Lender · Springfield, MO · Member since 2023 · 16 posts · 15 votes
2y
Hey Adam, if the property fits your budget and DSCR requirements to cashflow, you should not have a problem acquiring financing for this type of property as long as your FICO and appraisal are qualifying.
Generally, for a DSCR loan, you are looking at putting ~20% down towards the purchase price plus closing costs. If you are looking to recoup your initial investment, you may want to find a property to rehab that can be cashed out once the renovations are complete based on the ARV. This can occur as soon as 3 months post close with repairs on a short-term IO program.
Feel free to reach out anytime if you are looking for standard or creative financing tips.
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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
2y
Quote from @Adam Eckhoff:

Good Morning,
My name is Adam Eckhoff, commercial appraiser in New Jersey. Quick question for you all... Let's say I search for a $200,000, 2-unit duplex, on Realtor.com located in let's say Columbus, Ohio. Hypothetically speaking, let's assume the duplex generates $500 per month in income (after expenses, management, etc..).

Why would I not just pull the trigger and purchase the property, assuming I can find a management team to take care of it.
How would i get money back out to purchase another property (how could i leverage it). Do i just save the $500 a month and use that to purchase another one down the road (assuming i living in a perfect world with no repairs/reserves/ cap exp..)
Thanks,
Adam.

You would need to wait a few years before you could pull any of your money back in my experience. Unless you do a major rehab or buy a screaming good deal
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Evan HoppleBusiness Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
2y
@Adam Eckhoff

I invest in Columbus, OH. Expect something closer to $200/month of positive cashflow for a $200k turnkey rental here - unless this is a cash purchase

The best way I see to redeploy capital in our market is to find a property that needs some level of work with below market rents. Stabilize that property with updates and fill it with market rents and then refinance to move on to the next. (BRRRR method)
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Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
2y
Quote from @Adam Eckhoff:

Good Morning,
My name is Adam Eckhoff, commercial appraiser in New Jersey. Quick question for you all... Let's say I search for a $200,000, 2-unit duplex, on Realtor.com located in let's say Columbus, Ohio. Hypothetically speaking, let's assume the duplex generates $500 per month in income (after expenses, management, etc..).

Why would I not just pull the trigger and purchase the property, assuming I can find a management team to take care of it.
How would i get money back out to purchase another property (how could i leverage it). Do i just save the $500 a month and use that to purchase another one down the road (assuming i living in a perfect world with no repairs/reserves/ cap exp..)
Thanks,
Adam.
Hey Adam, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
[email protected]614-300-7535
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Sam McCormackBusiness Member
Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
2y
Quote from @Adam Eckhoff:

Good Morning,
My name is Adam Eckhoff, commercial appraiser in New Jersey. Quick question for you all... Let's say I search for a $200,000, 2-unit duplex, on Realtor.com located in let's say Columbus, Ohio. Hypothetically speaking, let's assume the duplex generates $500 per month in income (after expenses, management, etc..).

Why would I not just pull the trigger and purchase the property, assuming I can find a management team to take care of it.
How would i get money back out to purchase another property (how could i leverage it). Do i just save the $500 a month and use that to purchase another one down the road (assuming i living in a perfect world with no repairs/reserves/ cap exp..)
Thanks,
Adam.

$500/month is hard at 200k, pretty hard. After everything is said and done with no work, like 12, 13% ROI. 6, 7, 8% in mid-high 200's is possible in Cincinnati/NKY. Those realistic numbers will serve you better
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Lindsay DavisBusiness Member
Real Estate Broker · Birmingham, AL · Member since 2019 · 326 posts · 203 votes
2y
@Adam Eckhoff,

I worry that this hypothetical comes with key assumptions that could make or break your deal.

For instance, you assume that a $200,000 property can earn $500 in monthly NOI—but what if these estimates are incorrect? After all, it's very difficult to know with certainty how much this duplex will earn beforehand since some facts will only reveal themselves to you once you purchase it.

Similarly, a “turnkey” rental may not actually be turnkey. Sure, you could work with a property manager and have them handle maintenance and leasing issues, but that still leaves crucial expenses like property tax increases and turnover costs outside their control. To put it succinctly, “more fiction is written into Excel than Word”.

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