Guaranteed 21% Annual Appreciation? Columbus, Oh?...where else?

82 Replies

How is your MF market price appreciation?

I hear a lot of folks claiming their market is on "fire", but nobody ever supports that with data...our local MF market in Columbus, Ohio has appreciated at a year-over average of 21% in the 20 most productive zip codes for the last 5-years...the highest appreciating zip code grew at a rate of 64%...

How is your MF market price appreciation in other major metro areas?...Raleigh? Nashville? Indianapolis?....others?

Originally posted by @Brandon Sturgill :

How is your MF market price appreciation?

I hear a lot of folks claiming their market is on "fire", but nobody ever supports that with data...our local MF market in Columbus, Ohio has appreciated at a year-over average of 21% in the 20 most productive zip codes for the last 5-years...the highest appreciating zip code grew at a rate of 64%...

How is your MF market price appreciation in other major metro areas?...Raleigh? Nashville? Indianapolis?....others?

 Can you define what you are calling appreciation? Rents? Cashflow? Values? Population? Lot's of ways you can package that.

You mean to tell me that a multifamily building in Columbus, OH that sold for $1mm on 2016, now sells for $11.86mm today just through appreciation with no value add? 64% year over year growth for 5 years did not happen in the RE world. 

@Brandon Sturgill , like the others, I am a little skeptical on these numbers.  Cincinnati was up there as of late, and reportedly had the lowest days on market in the country for single family homes up until recently.  I am thinking to some flips we sold in 2016 and what that same house would achieve today, and it is still likely a 40% increase, but I would want to see how much of that growth you are referencing had rehab component tied to it.

I come up with a different number than Todd: $1mm grew to $2.6mm, in 5 years, if compounding, to simple interest to $2.1mm.  

I would imagine, without knowing the numbers, that the coastal major metros saw better than that, or close, even with the current pandemic pricing accounted for.  

lol...good point @Todd Dexheimer

Have you heard the phrase "your data will tell you anything you want if you torture it long enough"...95% of our local "MF market" is made up of transactions less than 5-units...the price appreciation grew exponentially in the lower asset classes...so, we are seeing 4-unit properties that traded 3-years ago at $75k trade at $250k today...cosmetic renovations or no renovations. 

I would consider price appreciation in a commercial residential a by-product of NOI, and no...our rents have not increased 5,000% here.

It depends on the specific asset, sub-market, etc. I will say that in Indianapolis we were buying 2000's vintage 200+ unit properties for ~110k/unit two years ago, last year they were trading in the $130k/unit range, and I've seen current on market listings closer to $145k/unit. 

That's more anecdotal, however. 

@Evan Polaski here is one of our zip codes that has experienced mild growth as an example...

we're talking about 95% small MF properties here (no SFR)...most of our market looks like this...

I think you will see this in many other comparable markets as well...just looking for the Nashville and Raleigh guys to chime in. I'm listing modest duplexes with only cosmetic renovations in this location for $300k-$350k year to date...up from $275k 4-months ago...next year I'll help the same clients exit at $450k...

Originally posted by @Evan Polaski :

@Brandon Sturgill , like the others, I am a little skeptical on these numbers.  Cincinnati was up there as of late, and reportedly had the lowest days on market in the country for single family homes up until recently.  I am thinking to some flips we sold in 2016 and what that same house would achieve today, and it is still likely a 40% increase, but I would want to see how much of that growth you are referencing had rehab component tied to it.

I come up with a different number than Todd: $1mm grew to $2.6mm, in 5 years, if compounding, to simple interest to $2.1mm.  

I would imagine, without knowing the numbers, that the coastal major metros saw better than that, or close, even with the current pandemic pricing accounted for.  

Trying to figure out that math. $1mm with a simple growth of 64% in year one grows to $1,640,000, then take the $1.64mm x 64% growth for year 2, then 3, then 4, then 5 = $11.86mm. I guess it's interpretation of numbers and how you're assuming the 64% growth 

If your market can guarantee 21% for the next 5 years Ill make a deal with you. I will give you one million dollars and ask for a guaranteed 15% return. You can keep the difference. I will need collateral equal to $1m for the loan but since your returns are "guaranteed" you should have no problem with that right?

Guaranteeing what in writing @Jai Reddy

This is just math...anyone can do it...it's division. If you are asking if my math is correct, yes it is. I was really hoping to see some other folks in similar markets doing some math on their market and letting me know what the figures look like. 

Step 1- Download closed properties

Step 2- Organize by years

Step 3- Calculate the rate of growth from one year to the next

Step 4- Find the average

Happy to send the data over.

Originally posted by @Brandon Sturgill :

Guaranteeing what in writing @Jai Reddy

This is just math...anyone can do it...it's division. If you are asking if my math is correct, yes it is. I was really hoping to see some other folks in similar markets doing some math on their market and letting me know what the figures look like. 

Step 1- Download closed properties

Step 2- Organize by years

Step 3- Calculate the rate of growth from one year to the next

Step 4- Find the average

Happy to send the data over.

Its interesting you ask 'Guaranteeing what in writing'. What else, but the title of your post which reads 'Guaranteed 21% Annual Appreciation? Columbus, Oh?...where else?'

All the above 'just math' you describe are valid, if you rephrased your post to say 'Guaranteed Historical 21% Annual Appreciation'

Point taken @Jai Reddy

I have already taken one other investor on the offer...he is asking for a 15% return...$1m commitment. But here is the truth...if you purchase in any of the dozen or so locations I'm talking about in Columbus...your property will appreciate at 21%...this year...next year...and the year after.

2021- 10 SFR's purchased in Franklinton for $100,000 each w/$15,000 Renovation each

2022- 10 SFR's sold in Franklinton for $220,000 each

These aren't flips...these are basic cosmetic renovations doubling the value of the property  

Originally posted by @Brandon Sturgill :

Point taken @Jai Reddy

I have already taken one other investor on the offer...he is asking for a 15% return...$1m commitment. But here is the truth...if you purchase in any of the dozen or so locations I'm talking about in Columbus...your property will appreciate at 21%...this year...next year...and the year after.

2021- 10 SFR's purchased in Franklinton for $100,000 each w/$15,000 Renovation each

2022- 10 SFR's sold in Franklinton for $220,000 each

These aren't flips...these are basic cosmetic renovations doubling the value of the property  

 Columbus, Ohio to the moon

@Brandon Sturgill

Then, it seems your data has given you the confidence to guarantee the return. When you mentioned your lawyer drafting up an agreement for a 15% return, I thought it was in jest.

Wishing you the best then.

@Brandon Sturgill

I think your calculation for smaller MFs and SFs around Columbus for the past 12 months is accurate. But then again, the past 12 months the market has been on steroid. Just look at what is happening with stock market. Given the infrastructural investments from the the city of Columbus, I think the appreciation will continue but nothing close to what we are seeing in this low interest rate, low inventory, high individual saving environment. IMO, it will adjust and goes back to baseline.  

Originally posted by @Brandon Sturgill :

@Anish Tolia My contact information is in my signature. I'll have my lawyer draft the agreement terms. 

not to get technical but to Guarantee a return you will need to do a REG A offering.. and those cost about 50 to 100k to prep .. 

 

I swear to god most of this Columbus growth is just our fleet of boiler-room realtors with their biggerpockets keyword nets capturing all the wandering California money.  Y'all killing me. What am I supposed to do, start buying in Newark or Circleville? Yuck

I do kick myself every time I drive by a few of the small local multifamilies I got outbid on by what seems like nickles 3 or 4 years ago.  I didn't know what an escalation clause was then.