Does my Buy Box make sense?

Question

Hello! I am a new investor looking to purchase a single family home or duplex in the Columbus, OH area. I am looking for properties around $200,000, and my goal is to gain experience with a rental property and at least break even cash flow wise. I am trying to use conservative numbers, however the deals I've looked at so far are far from working. I am using the following numbers:

Closing Costs: 5% Sale Price

Mortgage Rate: Use today’s 30 yr fixed from Zero Flux

Annual Insurance: $1,500

Down Payment: 15% for single family, 20% for duplex

Rent: Look at Zillow/Redfin in neighborhood, choose bottom end

Property Taxes: Use MLS

Capex: 10% of rent

Vacancy: 10% rent

Management Fees: 10% rent

Repairs and Maintenance: 5% rent

Utilities: 5% rent on duplex, $0 on single family

I've gotten my insurance number by talking to my agent. This number is very conservative based on what we've talked about, wondering if I am expecting to pay too much for insurance.

Also, I am only using these numbers for a quick and dirty analysis. If a property looks like its close to working with these numbers I plan on drilling in and getting more specific with expenses.

Thank you for any help on this, especially from any Ohio investors!

Marc Rice · Answer

Vacancy rate would be around 5-7%. The rest makes sense. I own 50+ units in Columbus, happy to help!

Bo Smith · Answer

Riley, Chris is right -- you're fighting the down payment math. In appreciating markets like Columbus, 15-20% down doesn't get you there. But that's not a problem with your analysis, that's a feature. Your numbers are telling you something: the market is priced for appreciation, not day-one cash flow.

Here's the reframe: if you can't find cash flow at 15% down, that's okay. You're a newer investor. Your first rental doesn't have to cash flow 00/month. It needs to not bleed you out, appreciate, and let you build equity while you learn. The insurance, taxes, and maintenance estimates you're using are solid. Don't feel bad that the deals don't work at 15% down. That tells you to either: (a) adjust to 30-35% down and get cash flow, or (b) accept that Columbus right now is appreciation play, not cash flow play.

You don't have to do both. Some investors are fine buying for appreciation in hot markets and cash flowing in secondary markets. The key is knowing which one you're doing and accepting it upfront.

What's your timeline? Are you trying to get into a rental this year, or do you have time to save that down payment difference?

Bo Smith · Answer

Riley, your numbers are solid and conservative. The insurance number is worth double-checking with a few local agents because rates vary widely in Ohio. But assuming ,500 is actually what you'll pay, your framework is the right way to evaluate deals. The problem you're running into is that Columbus real estate hasn't appreciated much, and 15% down doesn't cut it for cash flow on 00k properties in most markets.

Here's the reality: Columbus is a good market, but it's not a cash flow market at 00k entry price. Most 00k properties in Columbus are going to rent for ,200-1,400/month after vacancy and expenses. Your mortgage alone on 15% down is running ,600+. That's negative cash flow from day one.

Two fixes: go higher on the down payment (30% is realistic for cash flow), or lower the purchase price. At 50k purchase price with 20% down, you're looking at better cash flow potential. OR target properties in secondary Ohio markets -- Youngstown, Canton, Lima -- where 50k gets you rents of ,000+. Columbus is appreciating, but appreciation won't help you if you need monthly cash flow.

The other issue: if you're getting negative cash flow, you need that property to appreciate 3-4% a year just to break even after taxes and repairs. That's a long-term hold with no monthly cushion.

Are you flexible on purchase price, or is 00k your ceiling for this market? And what monthly cash flow number would feel like a "win" to you?

Jimmy Lieu · Answer

Hi Riley! Welcome to BP! Your numbers are actually pretty conservative, which is a good way to start. The 10% vacancy, 10% CapEx, and 10% management assumptions are common rules of thumb for quick analysis. Your insurance estimate around $1,500 for a typical single-family in Columbus is also pretty reasonable depending on age and coverage, so you’re not far off there. The challenge right now is simply finding deals that pencil with those conservative assumptions. One reason many investors still like the Columbus market though is the strong fundamentals—population and job growth plus major employers like Intel, Amazon, Google, Honda, and others expanding here. Even with that growth, there are still areas where properties around the $120k–$180k range can get close to the 1% rule and produce better cash flow than many other metros. With the right buy, the long-term appreciation potential here is solid too. Happy to connect and answer any questions you have!

Drew Sygit · Answer

You're starting out pretty well, but missing some key understandings of how this will actually play out😌

1) Make sure you understand the difference between Class A, B, C, & D rentals

2) Same goes for corresponding Class A, B, C & D tenants😯- How are you taking into account possible tenant nonperformance & damages?

3) Property Taxes: research if and how much they will change with your purchase.

4) It's a bit overkill to worry about Capex with 1-4 unit rentals. just make sure you have access to 4-6 months of reserve payments and you should be fine.

Stuart Udis · Answer

Cap ex of 10% over time on $200,000 real estate is going to be very difficult to sustain. Lower cost real estate is disproportionately impacted. Mor broadly when you are reliant on entirely 3rd party vendors it's very difficult to sustain these properties and that's what you will be reliant upon when you are in MT buying properties in OH.

Rick Albert · Answer

Property Taxes: That is going to show you what the current owner is paying, not what it actually might be. Sites like Zillow and others where they give you the potential PITI breakdown is likely your best bet.

Management Fees: This one is tricky. It might be 10% of the rents, but then they may upcharge for maintenance work, upcharge for new and renewing leases, etc. BP did the math and I believe it actually came out to 15%-18% of the actual rents. So either beef it up here or potentially beef it up in the other categories.

Utilities: Unless there is common areas, I would split the utilities between the units and bill back.

Nicholas L. · Answer

@Riley Iris

hello.  have you been to Columbus?  and if not - can you go there, ideally a bunch of times, and a build of network of real humans?

I am not sure if this is you, but we see so many new investors in the forums who want to browse on Zillow without putting in the more difficult work of walking properties and talking to locals.

based on your post I think your expectations are a little more realistic, which is great.  but, without being hands-on this is the type of thing that tends to happen:

Out-of-State Landlord Nightmare: 4 Months No Rent, Cleveland Escrow Battle

Failed BRR in Memphis TN

A Cautionary Tale About a Property Manager in Cinncinatti

https://www.biggerpockets.com/forums/48/topics/1242392-rough...

https://www.biggerpockets.com/forums/48/topics/1137397-balti...

https://www.biggerpockets.com/forums/432/topics/1231840-sell...

https://www.biggerpockets.com/forums/311/topics/840134-memph...

https://www.biggerpockets.com/forums/963/topics/1195280-expe...

hope this helps

Sam Tato · Answer

I posted about this in another thread recently - capex and rent are not related, but I see 10% of rent for pro forma capex analysis a lot in the forums.

Over the past decade my duplexes have shown actual capex+repairs at $600/month. If I used the normal 10% capex and 5% repairs rules of thumb that would be around $300/month.  Half the real number.

If you want a cap ex number that's closer to reality - list every cap ex item (roof, driveway, kitchen remodel, etc.) - estimate their replacement costs in your market - then adjust for useful life to nail down a more accurate monthy number, then you can turn that into a square footage rule of thumb, rather than percentage of rent.

Does my Buy Box make sense?

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