I need honest experienced opinions.
I located a property in Cincinnati Ohio, placed it under contract last week. I am not located in Cincinnati Ohio; This will be my first out of state investment property. I did an analysis using the BP software and the initial analysis looks good with a cap rate of 9.45% and Cash On Cash ROI at 16.38%. After paying all expenses the property will have a net cash flow of 369.81.
I'm looking for advice from experienced investors who either have invested out of state or have actually invested in their back yard of Cincinnati Ohio. The property is located near the Roselawn District. I am having second thoughts on bringing this deal into fruition mainly because
1) The area (crime)
Through my own sources I was able to get Police history about the street I am investing on. From the police report, it seems as if the police are getting called there 2-3 times of day from crimes ranging from Criminal Trespass to shots fired, to even Domestic Disputes in the 4 plex I want to invest in. ( The four-plex already has tenants in place). Even with a good property manager, I don't want my blood pressure going up every day/night because fear that someone will break in, steal copper, or break windows 5-6 times a year. I would be placing my entire faith in a property manager. Property managers do great jobs, but I know they will not go to the end of the earth and care for your property the way you would for a mere 10% cut of the total rents
2) Dowry State
I just found out that Ohio is a Dowry state. My wife will have to sign at closing even though she is not financially responsible for the mortgage etc. I am married and yes I love my wife, I just don't want her financially or legally tied to the deal as I want to be the one soley taking the risk
I don't wish to discourage out of town investors, I am looking for sound guidance from some of you who have done this and any advice you would give to a newbie such as me.
@Damian White , if your cash flow is only ~$360 a month, with all that crime is it really worth it? Your analysis assumes 100% rent payments, which you won't likely get. Properties like that have higher than expected maintenance and repairs, and the property is likely not in as good condition as you think it is. That will result in Section 8 abatements and possibly even the city building department finding violations (they find the smallest things). I've got a cash flow on my property of about $2,000 a month, and I'm still second guessing my investment!!! That return simply isn't worth the hassle.
@Ray Harrell Thank you for your seasoned advice. Much appreciated.
@Damian White those don't seem like such great numbers for Roselawn. Not bad, just not great. It was smart of you to look into the criminal history of the street, that's a serious factor in areas like Roselawn that are street-to-street when it comes to crime.
Thinking big-picture, I'd recommend that you be diligent in your insurance search too. What would an insurance claim look like for stolen pipes causing water damage and super high water bills? Or for several busted windows, or stolen appliances?
@Paul Sian would be a great resource for explaining to you exactly how the dowry laws could affect your wife's liability in the property. He's a RE attorney as well as an agent and investor.
@Damian White , you can drive for Uber/Lyft and make $360 a month with no down payment! AND, you can write off your vehicle expenses! Just food for thought. Is it worth $360 a month to you to get calls about busted windows and doors due to a fight? You being ticketed for owning a nuisance property? If all your tenants leave, how difficult do you think it will be to get responsible tenants on your block? You would only attract more of the same.
If this is a 4-unit, you're looking to cashflow less than $100 per unit, per month. You didn't mention anything about updating the units so sounds like this is a buy and hold play. You should plan for high vacancy and turnover. Most PMs will want 8-10% and first months rent of a new tenant. How does that impact your analysis?
I own a few properties in Roselawn and am currently selling off a single family property there. I could probably let you know if you got a good deal or not on your buy. Let me know how many units/bedrooms, price, condition, etc.
Less than $100 cash-flow per door and a lot of potential problems to boot. Without digging into it, I would suggest looking for a better property. If you insist on digging deeper, I would talk to the PM about how they could help improve the situation or ask for evidence they're qualified to handle this kind of property.
@john casmon. I can imagine the property has high turnover being one unit is currently vacant. The more analysis advice i receive, it seems like this is not the best deal for me
I have escape clauses in my contract set in place. Any wise words of wisdom to firmly but gracefully bow outta my contract?... i will be moving onto the next deal. Thanks 4 advice to you all
@Damian White , you are already under contract? That kind of changes things, doesn't it? Find things in the home inspection that you're not willing to deal with. What other clauses do you have?
I have one piece of advice about crime maps. they are not always representative of what one will experience. Where I live is a GREAT neighborhood. It's not crime free, but in the 5 years I've been there I've never experienced or witnessed any crime AT ALL! But I know it's there. The crime map color is the same as my South side property where crime is reported all the time. But there are very, VERY few places in Chicago where the crime map shows clear.
@Ray Harrell, Buyer is not satisfied with the condition of the REal Estate as revealed by the inspections
If written settlement of the condition of the Real Estate is not reached within the settlement period , buyer shall have the option to withdraw written request for corrections
If Buyer is not satisfied with the condition of the Real Estate as revealed by the inspections and desires to terminate this contract, Buyer shall provide written notification to LIsting Firm or Selleer, that Buyer is exercising Buye's right to terminate this contract withing the Inspection Period and this contract shall be terminated
As many have already pointed out, it sounds like a bad buy. However, as for Dowry rights its pretty simple. If you are married when you buy a property, or married when you sell, your spouse has equal rights to the ownership. Even if they are not on the deed or mortgage. Even if your state has no dowry law, it always falls under the law of the state where the property is located. Even if you have a prenuptial agreement or corporate entity, your spouse has equal rights to your ownership stake. I am not an attorney but I have ran into lots of issues involving Dowry rights for in state and out of state clients, Ohio is one of the last 3 states that use this old law.
Thank you joseph cornwell
Update on Cincinatti Fourplex. These are the following Repair or Replace recommendations from the Inspector:
- Concrete Steps
- fascia around the perimeter
- clogged drain or flooding potential by driveway
- signs of water intrusion noted in the basement
- aging signs on room (Potato chip constancy)
- cracked shingles
- No metal chimney cap
- Chimney flashing leaking
- drywall cracking in Living room of unit 2
- Flooring in Kitchen unit 3 is damaged
- The ignitor for the oven in unit 4 requires replacement.
- The toilet in the bathroom of unit 2 is leaking. Repair by a licensed plumber is recommended.
- Low hot water pressure was noted in the bathroom shower faucet of unit 1. I recommend contacting a
- plumber to determine the cause of the low pressure.
- Rust noted on gas water heater
- needs a fire rated door
The inspector noted absent of the following, He would actually add it to his list of rentals that he already owns. What do you guys think? I have 4 days following the inspection to either re negotiate or walk away. It seems like alot for an out of state investor. All this could easily add up to about 25k. If I was living there, I would dive in. But still have reservations.
I used to live there when I first came to Cincinnati (moved out after two months), would not recommend to buy in Roselawn unless it's extremely smoking deal (based on your numbers it's not :-/ )
Thank you Konstantine
depends on the part of rose lawn. There are nice home owner areas and LOTS more rental areas. Stay away from high absentee landlord areas. Lots of transient folks who move from eviction to eviction.
That's said I gave handyman customers in the area who have lived there for generations and care about the area. Not an easy place to know from out of state.
Offer to pay a local investor to come evaluate it for you. If they say no, keep your eye on it to ensure they don't buy it.
Your best option is to put the property in an LLC where you are the sole member, then the liability is solely on the company with you most likely personally guaranteeing the loan. As for Dower Rights, your wife doesn't actually need to sign for the purchase of the property, only the sale. I'm not an attorney so this is not legal advice, but I haven't purchased properties in my name without my wife signing, but then when I went to sell the property, she had to come to closing to sign.
We own 3 quads in Roselawn and they have been consistent money makers. Our property manager owns another 3 on the same street. The turnover has been lower than our buildings in other areas. As others pointed out Roselawn is very block to block. If you can get a 16% return on cash, that is not bad in my opinion.
@Ryan Ball My initial analysis does reveal only a 13.29% Cash on Cash ROI. Insurance and Property taxes eat up alot of the monthly income. A look of my quad on County Auditor online revealed total tax for 2017 was $3,359,20... Yikes...
@Damian White if you ever want to talk about Cincinnati feel free to reach out.
I personally like the Roselawn district. To me, it is a B class neighborhood for the most part. There are a lot of parts of Cincinnati that are very street to street. The only problem is the schools are not the best for the most part in that area. If you are worried about crime there are simple tricks to make vacant units look occupied such as putting a light and radio on a timer or using security systems such as simpli safe.
Also maybe talk to @Paul Sian about property management.
As far as number 2 goes I have no experience with that but maybe @Paul Sian can shed some light since he is also a real estate attorney/ property manager/ real estate agent.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing