Where in OH are you investing and Why?

96 Replies

@Federico Gutierrez what seems like a more realistic number? that is just a target i've heard from a few others although maybe it is indeed too high? while i am new to the game, i did purchase a property in Oregon at the beginning of the year that is doing a little more than that. Perhaps i got lucky. would love to hear what average expectations would be.

I wish I could respond faster folks but my eyelids just wont stay open longer than they already do! 

@DL Martin , are you saying that it is not possible to make $200 per door in OH markets? I do mean 200 clear after all expenses assuming 25% down payment which is what my CA bank is requesting for a investment property. I am still wet behind the ears as a they sat but just listening to the podcasts I keep hearing at least 100 per door, Turner likes to shoot for 200 and just the other day Bryce Stewart mentioned he is making 500 per door in PA, granted he is self managing but even with a PM he would be netting 100k a year. That is nothing to complain about. I wish I had that going right now! :) . What are you getting per door in Cincy market on average, what percent down, PM? Where were you at in Cali? I see part of my paycheck is paying your retirement :) 

@Garrett Bailey , I have not completely disregarded Cincy I keep reading good things there as well. 

@Sunny D. , Congrats, that is awesome! I am hoping to do the same. Thanks for sharing your zips. I have not heard of IRR an just looked it up. Looks like a metric I am not aware of. The 15yr mortgage is a great idea if you can afford the monthly payment! So much money saved and then so much cash flow once you are done with the bank. Good strategy. We may have to meet up sometime since you are right over the hill.

@Federico Gutierrez , wow that seems amazing to grow that fast so quickly. Where did your financing come from to collect the deals? My goal would be to have 20 units making 500 a door. I know this wont happen when buying initially but could work up to that point. I have about the same amount you had to start. Looks like i need to reach out to Holton-Wise to get a MLS list set up to my inbox to start analyzing deals in the area! You mentioned its 2018 not 2008, understood but you have to realize that if I can purchase a mutifamily for 100K and make 1000K per month gross it is much better that paying 250-300k for the same property in CA and getting the same for rent. I could make 1000 per door or more on any deal, buy all cash and there is your answer. I could make 200 per door here in CA, all I need is 50% down. I think the down payment is what you make it to get the cash flow you want. You can leverage a lot and make less or leverage less and get more per door. Again, newbie here and could just be an idiot but looks to me that 200 should be possible. I must be leaving out a lot of expenses that I am not aware of. Michael swan mentioned on his podcast he is making 200 on his deals i believe. Granted he is in commercial apartments at this time. Would love to hear your input!

@Jeffrey Boyce , welcome aboard mate! Looks like we have the same direction. Good luck on your journey. I am reading david's book at the moment to gain as much info as possible. Looks like you are already in the game in OR with a cash flowing property. Nice! Good question for Federico as well. I would be interested in what is a good expectation.

Thank you all!

Originally posted by @Kevin Moules :

I wish I could respond faster folks but my eyelids just wont stay open longer than they already do! 

@DL Martin, are you saying that it is not possible to make $200 per door in OH markets? I do mean 200 clear after all expenses assuming 25% down payment which is what my CA bank is requesting for a investment property.  What are you getting per door in Cincy market on average, what percent down, PM? Where were you at in Cali? I see part of my paycheck is paying your retirement :) 

-Sorry. To clarify, I am asking what is the purchase price to clear that $200 per door? For example, What would be the purchase price on a TurnKey in Cincinnati that clears $200 per month at 25% down?  I'm guessing that that is a $60k house??? 

-Looooooooooooong Beach. LBC. South Compton. The Hood. Artesia and The Boulevard, to be specific. 

 -My numbers are kind of inconsequential because I self manage and run my own rehabs. My complex was D class when I bought it and $200k later it is solid C class. I am not the typical BP person because I just don't believe in "passive" income.  I prefer to "work" a couple of hours a week and know exactly what the heck is going on at my property. I live 3.6 miles from my complex. If I post my numbers, people will be falsely encouraged and think that they can replicate my results from a thousand miles away... not possible. For instance, when I am at a big box and I see a great closeout deal on vinyl flooring, I will buy enough to do an apartment or two whether or I need it or not at that time. Same goes for glass top electric ranges and fridges on Craigslist. I have a 40' shipping container on my property that I use for storage, so it makes it easy for me to stay ahead on appliances and other supplies. On Fridays, my maintenance man spends 30 minutes with the push mower mowing around the buildings.  I pop my zero turn on my little trailer, run over to the complex, and knock out the rest of the yard for him in 20 minutes. Then I come home and cut my own grass. (1/2 acre, 12 minutes front yard, 18 minutes back yard). I am a huge zero turn fan. LOL. I save over $100 per week at the complex and $50 per week at my own house, by cutting my own grass. Thats $600 per month... AND my properties always look nice for the weekend because if it is going to rain on Friday, I just cut it on Thursday. I paid for lawn service in California, both at my own home and at my little 4 plex, for 15 years. But I had a real job. I no longer have a real job. 

Critics of my style will scream, "You can't scale!!!"  I just smile because I don't really want to scale. BP People don't understand that. 

Different strokes for different folks.

DL 

@DL Martin You can't scale!!! :)

I will not buy a building if I cannot clear $200/door per month post renovation/rent raise. However, like Mr. Martin said, it is difficult to replicate my situation from out of state. I manage my properties, I carefully vet each tenant, I stay on top of maintenance and make sure my apartments are nicer than anything else nearby so I can charge top of market rents. I source materials to get the best deal possible, and I manage my contractor team pretty carefully to keep cost down as much as I can, even though on my current projects I am not doing any work myself. All of which would be very difficult to do from out of state, so I would not expect the same return. 

Originally posted by @Joseph Cornwell :

@DL Martin You can't scale!!! :)

I will not buy a building if I cannot clear $200/door per month post renovation/rent raise. However, like Mr. Martin said, it is difficult to replicate my situation from out of state. I manage my properties, I carefully vet each tenant, I stay on top of maintenance and make sure my apartments are nicer than anything else nearby so I can charge top of market rents. I source materials to get the best deal possible, and I manage my contractor team pretty carefully to keep cost down as much as I can, even though on my current projects I am not doing any work myself. All of which would be very difficult to do from out of state, so I would not expect the same return. 

Self managing saves a huge amount and being that you watch your contractors. But most people here are out of state so it's very hard for them to think they can achieve the same ROI while enjoying warm weather on the west coast.

Originally posted by @Jeffrey Boyce :

@Federico Gutierrez what seems like a more realistic number? that is just a target i've heard from a few others although maybe it is indeed too high? while i am new to the game, i did purchase a property in Oregon at the beginning of the year that is doing a little more than that. Perhaps i got lucky. would love to hear what average expectations would be.

 If you can net $50-$100 per door after all of your costs & having your tenants pay down your mortgage you are doing good.

This is all really interesting.  I've been listening to BP for the past 6 months or so after a colleague told me about the podcast.  Every Thursday I tune in on my way to work.  However, I haven't ever really checked out the forums before.

I'm born and raised in San Diego, but with the current market and limited income (middle school teacher), out of state seems the most probably way to add to my portfolio.  I do have one rental property that I self-manage here in San Diego that does pretty well, but it seems very unlikely to be able to add another property locally.

If I have 30k to invest, would Cleveland or surrounding areas be a good place?  From what I've heard on the various podcasts, $200-$250/door seems more than reasonable.  I can't remember who it was off hand, but there was a guy a few weeks back talking about how he gets closer to $1000/door and doesn't want to touch anything below that...

I just looked up some properties really quick on loopnet (not sure where else everyone checks first), found some properties that would fit the 1% rule mentioned on BP and that would appear to clear more than $200/door after management fees and setting aside $100/mo for reserves.

@Kevin Moules hey as a newbie who invested oos I invest in Cincinnati. I bet you could be successful in any of the cities that have been mentioned. What is more important is your team. Build a team that is rock solid. Interview multiple PM’s and agents. From my experience, you can get a great deal but if you don’t have a team to back you, it could turn into a head ache.

@James Wise , wow $50-100 per month cash flow, that seems low compared to what I have heard people on podcast interviews say. I am with @Jeff Rapp . Maybe we are just dumb newbies hoping to recreate what podcast hosts have done. Maybe those guys are just blowing smoke and we are believing it, however I do not think that is the case. @Michael Swan I believe mentioned he will not touch a place unless it makes $200/door and he is investing Cleveland area as well. He is doing bigger apartments and there is economy in scale, that's probably how he makes his 200 per door but he was doing that when he started out there. 

If this is indeed the case I guess the only argument for investing OOS if your from CA is that the initial buy in is cheaper to get the same $50/door. But I am assuming you do not get the same appreciation in OH as you do in CA. Granted this should be icing on the cake from what I have gleaned from reading so far. 

@Jeff Rapp  welcome to BP!! I just joined three months ago and have been addicted ever since. I listen to about 1.5 podcasts per day. Started on 1 an now am at show 65. Learned so much! Since you are in SD and interested in Cleveland I would listen to @Michael Swan podcast. You can call him anytime and more than willing to share his knowledge. He really advocates reading Multifamily Millionaire which I plan to do after reading @David Greene book on lost distance investing.  The way the market is in CA I think I would sell your rental in SD and do a 1031 and get yourself a small multifamily in Cleveland suburbs. If I could find a cheaper place to move into I would almost be tempted to sell my personal residence here in Turlock, take my left over cash and buy in Cleveland. 

Also from what I have learned through reading is that anything on Loopnet are places you want to be weary of. Usually these are left over properties that investors do not want located in sub-par places. Just because its a good deal on paper does not mean its actually a good deal. I think Brandon Turner has that burned into my brain at this point :)

@Matthew Fitzgerald , as I read David's book I truly understand where you come from. David is doing a good job drilling that as I read through the book. About half way at this point. How do you like Cincinnati? That is my other possible location but maybe after I can settle in the Cleveland area. What kind of cash flow are you seeing after PM and all expenses, is it really around 50/door as James mentioned? SFR or MF? What price are you looking at?

Sorry for all the questions but when your the new guy there is only one way to learn, ASK!! :) 

Thanks Yall! 

@DL Martin , zero turn mowers are awesome!! I understand why you do not post numbers. I understand we cannot replicate same results if we are paying for PM. Thanks @Joseph Cornwell for the laugh, I figured someone had to do it!

DL, like you I do not plan to scale. I mean I do not plan on acquiring 100 units. That's not really my goal with RE. It would be fantastic to make 5k per month in CF from my properties. This would allow me to quit my day job and focus more on growing my handyman business which I run part time and achieve my goal of farming full time here in CA. It takes 1 million to buy 20 acres and a home around me and unless your growing CA newest cash crop (marijuana) whatever you grow will not pay for the land so I need to come up with a way to sustain the purpose. Maybe I do get the bug like Michael swan and decide to go all out but not my thought at the moment. Thanks for your input!! Are you looking to manage some other properties in your area? I could start looking in Cincinnati if you want to get more use from your zero turn! 

Thanks!

Hi @Kevin Moules ,

On apartment complexes if you can get $125.00 cash flow per door, that is pretty darn good.  I have 122 front doors and about $160,000 cash flow per year and rising as I keep expanding.

Now if you do residential 1-4 units with 25% down and you start with good reserves, you could cash flow about $300.00 a door in certain areas.  For single family (1-4 units residential) I would keep $10,000 in reserves for one door, 2-4 doors about $15,000 in reserves. 5-7 doors about $20,000-$25,000 in reserves and 8-10 front doors about $30,000 in reserves.  

Be ready for when Murphy's law raises its ugly head.  It is not if, it is when.  That book is called Multifamily Millions.  I am living pages 49-130 everyday in repositioning my 8 apartment complexes in Euclid, Lake County, and Akron at this very moment.

Swanny

@Michael Swan , thanks for the info. I think you are the one that says that you listen to people who know more than you or are bigger than you who are doing the same thing. I guess that's why I am on BP because everyone knows more than me at this point. Thanks for the clarity on price per door on the complexes. Good to know. 

On the reserves are you saying that you should have 30k per door for 8-10? So for 10 units have 300K in reserves? Seems like a lot. Maybe 30K total for 10 units? I will have to find out what these certain areas are to increase my chance of better cash flow. 

If you had 100K cash would you think it would be good idea to put 25k down on 4 properties? If I could find triplexes for 100k that would be great but I think mostly dreaming. Duplexes may be more realistic at that price range. What are your thoughts?

Thanks!

Hi @Kevin Moules ,

$30,000 for 8-10 doors total, due to having economies of scale.  If you have a few vacancies with 8-10 doors it won't kill you.  If you have a few vacancies with 3-4 doors that would be bad.

With the current rising interest environment right now and NO experience doing commercial Apartment complexes (being a newbie), I would just get 2 or 3 front doors with that $100,000 right now and keep that $15,000-$20,000 in reserves too.

Swanny

@Kevin Moules Thanks for the welcome, as well as the information!  The thought of doing a 1031 exchange came into my mind, but I'm cash flowing really well on that one unit I have and the fear of the unknown scares me a bit.  It's also about a 15 minute drive from my primary and I can easily swing by to attempt any repairs, etc.  Thank you as well for the information on those two books.  I hadn't heard of @Michael Swan 's book before, but @David Greene 's book has been getting plugged left and right lately, I think it's about time to get on that!  Between a 5m/o boy and teaching summer school, finding the time is hard, but you make time for what's important, right?!

@Michael Swan you're killing it!  What an inspiration.  

Hi @Jeff Rapp ,

That is David Lindahl's book called Multifamily Millions.  It is not my book.  Listen to podcast 238 and reach out to me. I was a guest with Brandon Turner and Scott Trench last August.  That was my first ever and my last podcast too.   Mindy Jensen contacted me to be a guest and she though my story would be motivational for others that ONLY made $80,000 combined family income, living in a pricey area like San Diego  I had 10 rental properties in San Diego that were cash flowing about $50,000 a year on 25% down payments and traded them all in when they doubled in value for Apartment complexes in NE Ohio. 

In 2011, I purchased my first little rental condo.  The lowest I paid was $93,000 for a 2 be 1ba and the highest I paid was $150,000 for a 3br 2ba condo with 25% down on each condo.  Most of those purchases were in Santee and Lakeside, small little blue collar neighborhoods in San Diego area.  When they doubled in price, I 1031 exchanged them for apartment complexes in 2015, 2016, and 2017.

The key is to defer, defer, defer, defer your taxes and then die.  At that moment your kid inherits at a stepped up basis and depreciation starts all over again.  No wonder Donald Trump doesn't want to divulge his taxes.  Duh!!!

Buy low, sell high, defer taxes  until you die!!!  Oh my!!!!!

I always leave time to talk on the phone to BP members.  Feel free to contact me.

I love this stuff!!

Swanny

@Michael Swan Thanks for the clarification, checking it out on Amazon right now!  Your podcast synopsis sounds EXACTLY like my situation and I will be listening to that on the way home this afternoon. 

Would definitely love to talk more, let's grab a beer or lunch one day!

Originally posted by @Michael Swan :

Hi @Kevin Moules ,

On apartment complexes if you can get $125.00 cash flow per door, that is pretty darn good.  I have 122 front doors and about $160,000 cash flow per year and rising as I keep expanding.

Now if you do residential 1-4 units with 25% down and you start with good reserves, you could cash flow about $300.00 a door in certain areas.  For single family (1-4 units residential) I would keep $10,000 in reserves for one door, 2-4 doors about $15,000 in reserves. 5-7 doors about $20,000-$25,000 in reserves and 8-10 front doors about $30,000 in reserves.  

Be ready for when Murphy's law raises its ugly head.  It is not if, it is when.  That book is called Multifamily Millions.  I am living pages 49-130 everyday in repositioning my 8 apartment complexes in Euclid, Lake County, and Akron at this very moment.

Swanny

 Kevin,

6 to one half a dozen to another. From what I am reading above looks like Swanny is saying the same thing I am saying. I'm saying your doin good if you'll clear $50-$100/door after all expenses including CAP EX savings. Swanny mentions $300/door & says you need to save $10k for Murphy's Law........Same concept, just different way of saying it.

I'm in Akron. I have purchased 21 units in the last 22 months and I have 12 more under contract.  It's hard to get $250/door. There are some business models that might make that possible around here-- (I think it's usually called ***slumlording*** but it's not a long term plan. Eventually those properties, in those neighborhoods will be torn down by the city and the property will go the landbank. 

on sfh or 1 to 4 unit buys, one important thing to do is make sure you buy the ones where large capex items are taken care of. Its better to pay 5k more on a fully rehabbed home with new roofs, boilers, windows etc. than buy one with capex deferred. 

My current goal is to sell the rehabbed homes in a 5 yr timeframe. Once home gets too old, then harder to find buyers unless you replace roof etc. 

@James Wise I see where your coming from now. That cap ex will sneak up on you. Hoping the possibility of making 200/door including cap ex is better than here in CA!

@Jill F. , way to go!! wow talk about some fast acquisitions! I have briefly looked in Akron as well. If you have purchased that many I am guessing Akron is a good buy and hold market? Did you have SFR before or did you jump right into commercial properties? Any recommendations on RE agents and PM I should contact in that area to learn more about the market? My goal is 5k per month passive income at this point. 22 units would help get me there! :) thanks for sharing!

@Sunny D. Very good points. This is kind of what I am looking for. It does not have to be a true turnkey place but If the big ticket items have been taken care of as of late then I would not have a problem paying more for the place. Nice to have less headaches!

@Michael Swan have you had to deal with the POS inspection on all your properties in OH? I just came across this term lately and am trying to learn more about it. Looks like it is a fee the sellers usually covers and the items found on the inspection have to be completed by the buyer on a certain date. Does this add more headached at time of purchase? 

Thanks all for your repkys, 

I am surprised to be reading that $200/door is difficult to get in the Cleveland area. I don’t know how you guys calculate your monthly returns per door (Like, do you just account for PITI, or also add expected depreciation, etc? Do you subtract expected capex? Is there a standard that each of you knows for a fact that all others are adhering to when discussing the dollar figure with the others here?) To me, in any case, the dollar figure is ambiguous because it will vary by the purchase price, downpayment, interest rate, local tax variances between towns/counties, etc.

In my own experience of buying in a Cleveland suburb with 8+ school ratings (not a D class neighborhood) back in 2016, I got more than $200 per door - after accounting for PITI, before any capex, and self-managing. But I don’t calculate my potential profit that way to begin with. Instead, I aim for a 1%+ monthly return. So, for an easy example: a $100,000 purchase should gross me $1,000 or more in monthly rent. A couple of people above referred to “The 1% Rule” already.

I haven’t looked at buying anything in the Cleveland area since last summer - and actually ended up getting better deals elsewhere then. But I do believe that good deals can still be had today.

In fact, looking at an email I received from a turnkey provider (who does not appear to have any presence on this site) there back in March of this year, she was selling SFRs in Parma, Parma Heights, Cleveland (44102), South Euclid, and University Heights at the time. The prices for these ranged from $85,000 to just under $127,000 (and these are just asking prices.) Her pro-forma showed “estimated gross monthly cash flow conventional financing” ranging from $271/mo to $344/mo on these properties - after accounting for 3% for vacancy, 3% for maintenance, and 8% for management. While I am too tired to figure out what interest rate she was assuming and what downpayment (she did not list these metrics,) all these properties are right around the 1% rule.

Having dealt with “turnkey” providers in other markets (I have no experience with any of those in the Cleveland area,) I’ve learned to find my own agents, who do nothing but represent buyers and sellers. You tell them what kind of schools you want, price/rent ratio, etc. They work for you. Just don’t forget to buy something from them at some point - only way they make money, not on managing your rentals.

I found my own agent in the area, while doing my own research on Zillow. She has a narrow specialty in a narrow geographic area of the Cleveland suburbs. And I am ok with her “limitations.” I quickly learned to trust her.

Back in 2016, my first property there, a duplex, was yielding 1.2% right off the bat. To put it into dollars: when accounting for my PITI (and nothing else,) I was pocketing just over $300/mo per door of that duplex. But I also knew (when I bought) that the rent had not been increased in a long time. By now, I get $487.50/door - a 1.575% monthly return. Again, I self-manage. This was not a turnkey, but an estate sale, the sellers of which quietly let a few people know they were willing to let it go for quite less than the asking price on the MLS at that time, after not an offer in months. My agent happened to be in the know.

Not long after this purchase, I bought another, much newer, duplex in the same suburb, after it had been sitting on the market for close to a year. I was getting about $650/door, after accounting only for PITI. I am making $687.50/door two years later. Though, if either of the current tenants moves out, I may go back down to the original return (this property is at the upper level of the market, and new builds are still coming on.)

Both of these properties were bought with 25% down, 30yr conforming.

Figure out what you want (city, type of property, approximate purchase price, price/rent ratio, age, level of acceptable deferred maintenance, etc.) and tell the agent(s). There is a chance that you may get an agent who will throw everything under the sun at you as a “great deal.” Assuming that your research on the area is right, keep to your “musts,” which will also let the agent know that you are a serious investor whose time they should no longer be wasting until they really have a great deal.

Keep in mind that Ohio property taxes vary widely from town to town, and some are just nuts, so choosing the city(ies) in the area should be your first step.