Investor · Cincinnati, OH · Member since 2019 · 89 posts · 23 votes
We found a 4 plex that has a cap rate of 7.5%, cash flows 590/m and provides a COC ROI of 26%. The only issue is it's in an area with higher crime than the rest of the city. Accounting for vacancies and everything, the NOI is right around $24K so this seems like a great deal. It's also been on the market for a while. I would love to know everyone's thoughts because there are a few schools nearby that have a 7 or even an 8/10. Any and all opinions are welcome!
I've definitely found myself drawn to these properties and managed to pull my eyes away because I'm not sure war zone investing is the way to go. One possibility is to talk to a few property managers and get their opinion about the property, location and possible tenants.
I've spoken to many investors about this. While the cash flow is good, it's important to factor in your business model. Personally, it's not mine. Market appreciation won't be as good in these areas, so you need to factor that in.
Sometimes it's easy to get caught up in the cash flow and ignore the rest, like lack of cash flow, property being neglected, etc.
While this doesn't provide much insight, I hope it helps!
I've definitely found myself drawn to these properties and managed to pull my eyes away because I'm not sure war zone investing is the way to go. One possibility is to talk to a few property managers and get their opinion about the property, location and possible tenants.
There is a reason why this place has been on the market for a while despite such "great" numbers. Either the numbers are not real or there is problem with tenants. You need to figure this out before you commit to purchase without contingencies.
@Eric Piccione Are those the returns that the owner is currently getting? I doubt it as properties like this look great on paper but are very management-intensive. Being that the RE market is extremely hot right now if it's been sitting for a long time that's a good sign something is off. These types of properties usually have quite a bit of deferred maintenance as well.
@Eric Piccione Are those the returns that the owner is currently getting? I doubt it as properties like this look great on paper but are very management-intensive. Being that the RE market is extremely hot right now if it's been sitting for a long time that's a good sign something is off. These types of properties usually have quite a bit of deferred maintenance as well.
Do you have experience managing low-end rentals?
No experience yet. I was planning on using a property manager to deal with tenants moving forward.
I have some experience with this. My first few properties have been in bad areas with high gang rates. If the 4 I got in a rough area 1 was worse then the others and the only property I have ever sold.
I had a corner property and some locals were selling drugs right out of a spot across the street. They loved sitting on my stoop to avoid cops as I had a private property cops did not bother them.
it's not ideal and a pretty ****** situation. with that said it was my very first property, I sucked it up and did what I had too. I was very happy to sell 2 years later for a low 6 figure profit before all fees.
Some of these areas are on the up and up and have GREAT APPRECIATION you would be so surprised.
The way I see it is simple. If you want in do what you have to do. Man up and handle what needs handling. Maybe this is a wrong way if thinking but for the first priority I had I was all in just to make it work. I was just happy to be in the game.
Now I'm looking for only decent areas i am comfortable walking around at night. however I would not be able to get what I have now without first buying in bad areas. If I had to rate it it was a c- area and now I'm looking at b/b- areas.
You will get tested walking to your property , the locals dont see it as yours they see it as there property and your just renting the real estate. It gets VERY hairy since involving cops if you have an issue makes it worse. You will get complaints from your rentals about the local element and there is not much you can do.
It's not all that bad but be prepared to boot up and man up (not trying to sound fake but it's the truth) and you will be fine. DO NOT EVER BUY ACROSS A GROCERY STORE OR A BODEGA I will never do that again ever ever ever. Imho.
I hope this in some way helps you , 2 years of a hard time for a low 6 figure profit, after taxes closing fees realestate fees etc made about 70k you make the decision. For a percentage I made about 33% in 2 years.