What has been an unexpected factor (positive or negative) that’s impacted your ROI?

Question

Hello! I’ve been digging into different Cleveland submarkets and have noticed some interesting trends in how actual returns compare to projected returns. For those actively investing in Cleveland or similar Midwest markets, I’m curious What has been the biggest unexpected factor, positive or negative that’s impacted your ROI?

Examples I’ve seen discussed:

• Longer than expected rehab timelines

• Inspection delays (city requirements/permits)

• Unexpected rent caps or slower lease ups

• Higher than expected maintenance costs

• Concerns with local management companies (over charging or lack of communication)

• Rents rising faster than anticipated in certain neighborhoods

I’m really interested in understanding where investors feel the numbers deviate from the initial underwriting, whether in your favor or against it. How has your experience lined up with your projections?

Drew Sygit · Answer

It's easy to just start an eviction for nonpayment and get rid of the tenant - but, expensive and kills cashflow.

We have defined Payment Plan options we literally chase tenants with and build rapport to get them back on track.

Of course, we have "guardrails" to get rid of tenants that really can no longer afford their rent or want to play games.

Drew Sygit · Answer

You forgot, nonperforming tenants😮

Garrett Crosby · Answer

The one that surprised me most across multiple CA deals — and I've heard versions of this from Midwest investors too — is the first major CapEx event timing. You can model 10% CapEx reserve, but if a $15,000 HVAC replacement hits in year 2 instead of year 8, it doesn't just cost money; it wipes out 1-2 years of accumulated cash flow in one event and completely changes how the deal feels psychologically. Most new investors underestimate how much variance there is in timing, not just cost.

On the positive surprise side: insurance discounts from documenting property upgrades, and rent growth exceeding projections in supply-constrained submarkets. On the negative: city inspection timelines for section 8/housing choice voucher properties in older cities are frequently wildly off from what was projected. An inspector availability backlog that adds 60 days to your vacancy is 2+ months of lost rent nobody modeled. Drew's non-performing tenant point is the other one — collections friction and court timelines are always longer than projected in new markets.

J Castro · Answer

Hi @R. Elle Berry, great question—Cleveland (and similar Midwest markets) is a perfect example of where projections can look great on paper but execution drives the real return.

From what I’ve seen, the biggest gaps between projected vs. actual ROI usually come down to a few key things:

1. Property management quality (biggest swing factor) Not just cost—but execution:

• Slow leasing = unexpected vacancy
• Poor tenant screening = turnover + maintenance spikes
• Weak communication = things slipping through the cracks

A good PM can outperform your pro forma—bad ones can kill it.

2. Rehab timelines + scope creep What looks like a 4–6 week project can easily turn into 8–12 weeks with:

• Contractor delays
• City inspections
• Hidden issues once walls open

That directly impacts holding costs and cash flow timing.

3. Maintenance vs. “true condition” of assets A lot of Midwest deals look turnkey but still carry:

• Older systems (plumbing, electrical, roofs)
• Deferred maintenance that shows up 6–12 months later

This is where initial underwriting often underestimates CapEx.

4. Rent assumptions vs. tenant base reality Rents may support your pro forma—but:

• Lease-up pace can be slower
• Tenant quality can vary by block, not just zip code
• Concessions or longer vacancy periods eat into returns

5. The upside surprise On the positive side, I’ve seen:

• Rents outperform projections in improving pockets
• Strong cash flow relative to basis when stabilized properly
• Refi opportunities earlier than expected when values move

In markets like Cleveland, the spread is there—but it’s earned through operations, not just acquisition.

The investors who do best aren’t just underwriting well—they’re:

• Tight on rehab execution
• Very selective with property management
• And conservative on timelines and expenses

Curious what others are seeing too—especially on PM performance, since that seems to be the biggest make-or-break factor in these markets.

J Castro · Answer

You’re spot on—and I like how you framed it: ROI isn’t won at purchase, it’s won in operations. That’s exactly what we see from the lending side too.

To your question on evaluating property managers—yes, there’s definitely a structure we’ve seen work consistently. It’s less about who sounds the best and more about who can prove repeatable execution.

Here’s how I’d break it down:

1. Leasing Speed + Quality (Not Just Vacancy Rate)

Most PMs will say they “keep units full,” but that’s not the full picture.

What actually matters:

• Average days on market
• Pre-leasing vs reactive leasing
• Tenant quality and retention

A PM that fills a unit fast but cycles tenants every 6–9 months will quietly destroy returns.

2. Turnover & Maintenance Data (This is where truth shows up)

Ask for real numbers:

• Average turnover cost per unit
• Maintenance tickets per month per door
• % of issues handled preventatively vs reactively

This is where you’ll quickly see who’s operating vs just managing.

3. Communication & Systems (Underrated but critical)

This is where a lot of operators get burned.

Look for:

• Owner portal with real-time reporting
• Clear SOPs for repairs, approvals, and tenant issues
• Defined response times

If communication is loose before you sign, it won’t get better after.

4. Market Depth (Hyper-local knowledge)

This ties directly into your “block-by-block” point.

Ask:

• How many units do you manage within a 1–2 mile radius?
• What’s your rent range by street or pocket?
• Where do you avoid placing tenants?

Good PMs speak in micro-markets, not zip codes.

5. Incentive Alignment (Most overlooked piece)

This is big.

• Are they incentivized just to collect rent, or to maximize NOI?
• Do they charge on collected rent or scheduled rent?
• How do they handle vacancy vs performance accountability?

If their incentives don’t align with yours, you’ll feel it over time.

6. Simple Stress Test (This is my favorite)

Before committing, ask them:

“If I give you 5 units in this exact area tomorrow, how do they perform over 12 months—vacancy, rent, and maintenance?”

Then compare that answer to:

• What other PMs say
• What actual investors are experiencing

You’re not looking for perfection—you’re looking for consistency and realism.

You already nailed the key insight:

Same asset, different operator = completely different return profile

That’s not theory—that’s exactly what we see play out across portfolios.

The best investors we work with treat PM selection almost like hiring a business partner, not a vendor.

R. Elle Berry · Answer

Hello. This is a really solid breakdown thank you and I agree with you, especially on execution being the true driver in markets like Cleveland.

If I had to add to your points, I'd double down on property management being the biggest hidden lever in ROI. I've seen firsthand how the same property can perform completely differently depending on who's managing it. It's not just about filling a unit it's about how it's filled, how tenants are handled, and how proactively issues are addressed before they become expensive problems.

One thing I’ve also noticed with the Cleveland market is block by block differences are often underestimated. Like you mentioned, the zip code might support the rent, but the actual tenant pool and turnover risk can shift dramatically within just a few streets. That’s something that doesn’t always show up clearly in underwriting.

On the rehab side I completely agree. I’ve started looking at projected timelines more as a best case scenario and building in buffer not just for time, but for decision making and coordination delays, especially when managing multiple projects.

Your point on “turnkey not always being truly turnkey” is also huge. A lot of newer investors don’t factor in that those older systems may not fail immediately but when they do, it clusters and hits cash flow all at once.

On a positive note, I’ve experienced what you mentioned with rents outperforming, especially when operations are tight and the asset is stabilized properly. That’s where the real wealth building starts. If anything, this just reinforces that in these markets, ROI isn’t won at purchase, it’s won in operations, systems, and team quality.

Out of curiosity, have you found a specific structure or system that’s helped you consistently evaluate property managers before committing? I look forward to hearing back.

R. Elle Berry · Answer

Hi Dave, thank you for responding and I apologize for the delay. But you statement made me chuckle, a pool! I never would have guess someone replying with a pool story and off season LOL. Well my parents had an above ground pool when I was young but it didn't last long LOL. I would never want the responsibility of a pool living in the mid-west.

Dave Stokley · Answer

Hi Elle, I invest in and manage STRs in and around Cleveland, and we have been surprised to see that properties with pools outperform other properties even in the offseason when the pool is closed! Maybe the photos just catch peoples attention better and drive more clicks and bookings.

R. Elle Berry · Answer

Hi Drew, the payment plan option and having great rapport is a great strategy to keep tenants on track. Thank you for sharing.

What has been an unexpected factor (positive or negative) that’s impacted your ROI?

What has been an unexpected factor (positive or negative) that’s impacted your ROI?

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