Real Estate Investing - Akron Ohio Area

Member since 2021 · 2 posts · 0 votes

Hi All! I'm a newbie here and stumbled upon this site as I recently started to explore the idea of investing in real estate. I am currently in the Akron area and thinking of starting off with investing in single family rental properties around the area. I've been doing some research and seem to be struggling with the profit that can be generated, it just doesn't seem worth the stress for 1 property. For example I've come across houses between 40-60k which can serve as rental property with average rent $800/month. However when I do the math (operating cost, property tax etc.) the ROI/profit doesn't look favorable after all the overhead cost. Should I wait until I can afford more than 1 property or am I thinking of it the wrong way? Again I'm completely new to this so any advice will be helpful and appreciated, thanks!

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Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
5y
@Sabrina Inem Welcome and congrats on getting started...on a basic level...for entry level stuff like you are looking at its about a couple of things. Think about 1- the out-of-pocket expenses (almost everyone gets this wrong)...and include all costs very conservatively...this includes things like the down payment, the inspection, appraisal, prepaids, points, closing costs, etc (find a good closing cost estimator or contact a local title agent to get buyer costs in your area)...and the extension of that is the condition of the property and needed repairs...if repairs are needed, that cash is coming out of your pocket....and you are paying property taxes, utility bills, to keep the yard up, etc...holding costs can grow very quickly if you run into renovation delays. 2- the relationship between the income the property produces and the purchase price. 3- realistic operating expenses...we've been able to run almost everything we manage at 20-30% of income...this isn't easy...most properties operate at 40-50% of income. 4- your goals...since you are a smart investor, you are not basing your decisions on cash flow, you are looking at long-term value, appreciation, debt-paydown, and most important, equity.
That said, if you are buying a $60k property with no repairs, occupied at $800/mo. and operating at 40% of income, your ROI is through the roof on paper...but finding your true ROI is a more difficult task.
What numbers are you using to analyze this one?
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Sabrina Inem
OP
Member since 2021 · 2 posts · 0 votes
5y
Thanks a lot @Brandon Sturgill this is super helpful!
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Nate Richards
Investor · Tallmadge, OH · Member since 2014 · 81 posts · 32 votes
5y
Yes. 1 unit brings increased risk, and potential stress, but that's how people start off. You just have to plan to add the second unit ASAP to off set your risk. The flip side is that when you buy something with solid bones, (roof, windows, hvac) you only have minor repairs to worry about for a while. The SFR also allows a newbie to defer some routine maintenance headaches (lawn care and direct handling of utilities) onto the tenant.
Appreciation isn't a driver on $60k homes, so you can't really own "rentals" in this area without wanting to be a cash flow investor.
Acquisition cost is an expense on all transactions and is an upfront expense not an "overhead" expense. Acquisition costs can be deducted from P&L at year end. You have zero overhead on your 1st SFR. No rent space cost to conduct your business, no accountant, no property maintenance/grounds keeping, no tradesmen, no property management.
You won't be able to streamline the up front costs until you have transaction volume. Your best course is get in, get experience, and get out if its not for you.
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