Hello All. I would like your thoughts on rental property CoC ROI in central Nebraska (Hastings, Grand Island, Kearney) vs other areas in the US. The properties that I have looked at so far all seem to have low CoC (when you account for vacancy, CapEx, R&M, & property management). I'm starting to think that the return just isn't at a desirable level in central Nebraska vs what I can get from... lets say Stocks.
I am looking for multifamily units (ideally 4 plex) that are 1bd/bth or 2bd/1bth per unit. I currently live in Northern Colorado and will be investing from a distance and hiring a local property management company. I am looking to buy in Central Nebraska because this is where I grew up, my family still lives in the area, I have a pretty good network of people, and I feel like I know the area. I am very interested in any thoughts you want to put out there.
What kind of ROI are you seeing on the properties you are coming across?
Hi David. I just purchased a duplex in Hastings. Costs can be low but a lot of properties are older. Be sure to do solid due diligence and get quality inspections. Hastings and Kearney in particular have decent sized college student bases which can give you a good rental pool if you are willing to rent to that group. From what I see rentals are in demand and flipping affordable housing could be lucrative as housing tends to be higher end or low quality at the starter level. An affordable, good looking home would sell fast.
@David A. - I have not flipped. I thought about it looking at some homes that were selling for under 60K with comps of homes that were in better shape in the 100-120K range. Decided to pull the trigger on the duplex as I should be getting an Cash on Cash ROI of 18% on it.
Good luck. I too grew up in central Nebraska. They are suffering from very low inventory, so probably won't be getting any great deals on price.
@Joe Lambert That makes me think that the rents I have been using for the area are too low and I could increase my rent estimates. Supply and demand. I have been using $400 for 1/1 bd/bth, $500 for 2/1 and, $600 for 3/1. This was for Hastings though. What rent estimates are others using for the different areas?
I’m looking more into these areas. It may be profitable to build and rent versus buy and deal with rehabbing.
@David A. 8% takes some work in Omaha. 10 months ago you could pick properties up off the mls and turn the key and get 8%. Now it takes work to find and then get the property up to par. I’m specifically talking about SFH as that’s all I’ve done.
I think your estimates on what to charge for rent in Hastings is low. I would say most people are expecting to pay more than that for a nice rental. I would easily up it $200 each. In Kearney even more so. The rentals in Kearney are turning a nice profit right now. When I’m looking at the rentals in these areas the prices are higher than what your estimating.
@Samantha Sinsel I see you are getting your real estate license. Are you looking for customers? Do you already own a rental(s) in Central Nebraska? If so, are they Multi or single?
David Ahrens, I invest in Kearney and average 20% C.O.C and 7-9 cap rates, however I BRRR with very little of my own money and self manage. You will most definitely have to market to college students to get any cap rates above 7%.
I would say your estimates are a little low as well. We are in SE Nebraska (Neb City/Syracuse). We have a mix of single family and multi family. All of our units are 2/1 and we average around $625/unit. We do price our units a little below market as we strongly believe we see returns in occupancy rate. We have been over 97% for 5 years. We only purchase units that will average net at least $150 per month. This is after piti, any utilities, and repair budget. We do not have too much trouble finding units to purchase that meet this criteria. Sometimes it means making offers on units at the price we know will make this formula work, even if they are below asking. Which they frequently are. You'd be surprised how often they are accepted. We routinely purchase homes in the 40-50k range that need minimal repairs. That allows us to stay right in the 15-20% CoC ROI range.
Ryan & Adam thanks for the feedback. It gives me renewed hope for finding my first rental property in my home state. @Adam Giles , I am curious how you found SE Nebraska if you are originally from Maine and now are in Arizona. I really like the strategy of keeping rents slightly below market to ensure occupancy. I'll start running with higher numbers and see if I can pull the trigger on a deal. Thanks again.
@David A. I actually lived there for a number years to be close to my wife's family. She grew up in Sidney IA. I am very happy that this is where I began my Real Estate journey. The market there is consistent, there are quality tenants, there are a number of great tradesmen, and entry prices are very reasonable. These types of markets are a great way to enter long term holds without excessive risk while you work on your processes.
I would reiterate that many of the deals we have done there were purchased well below what was being asked on MLS, or were purchased off market. Having great relationships with agents/brokers in these markets in very valuable. They always know a guy, who knows a guy in the next town over, that went to High School with his sister, and works on volunteer fire squad with a good friend of his brother's. Well, when that guy is thinking of selling, you can get in fast and low before anyone else knows. Love your agent.
Ive lives in Kearney all my life and I would have to agree with Samantha on this one. Typical rental rates for the Kearney market are between $300-$400 per door. I’ve been actively looking for a traditional multi-family house hack in Kearney for over a year now and haven’t had much luck. Most multi family properties in Kearney are Single family converted to multi families. The dilemma I’ve run into is the low rental rates compared to the higher asking price for property and property taxes. I’ve done my own direct mail marketing, reaching out to current landlords to see if they are interested in selling. Unfortunately, the assessed values of property from 2017 to 2018 increased dramatically and now landlords are demanding a higher price for their property - (whether they actually know what it’s worth or not) - that hasn’t probably been updated since the turn of the century. I am a first time homebuyer and I’m still keeping the faith in hopes of coming across a good deal here soon and would be open to answering any questions you have about the Kearney market from my perspective! Good luck!
Greetings David! I'm not sure about central NE.. but over here in Norfolk the market is pretty hot. One of our 18 unit complexes just sold for 600,000 and its a C- property.. There are still quite a few decent deals in the surrounding area though!
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