Cincinnati Multifamily Property Analysis

7 Replies

Cincinnati Area Investors - 

Just moved to the Cincinnati area in January - Been driving for dollars, networking at REI events, and watching the MLS to get my first deal in this area, but thought I'd get active on BiggerPockets as well.

A majority of multifamily properties I've looked at have been a decent or good deal. It's concerning. Am I looking at vacancy or costs wrong? Would appreciate any input!

Assumptions in general (case by case, but this is typical)

- Rent $ amounts collected from Rentometer - amount based on interior finishes, potential amenities

- Vacancy at 5-8%, repairs 5%, 10% cap ex, 10% property management  - are these usually higher in C class areas?

- Utilities seem to be split in one way or another from landlord to tenant (somtimes water, sometimes heat, just depends)

- $50 for lawn service per month, $20 for garbage

- low future assumptions (1% growth for all, 6% at sale)

- Lastly, 4.5% interest on a 20% down payment

- $3000 in closing costs, anywhere from 5000-20000 in initial repairs/upgrades (varies property to property)

Am I crazy? Let me know.

Thank Ya!

Kurtis

I could nit-pick, but in general none of that looks crazy to me Kurtis.  I think whether any potential property is a "good deal" or not will depend upon your expectations for total return.  My own perspective is that rental property should return a premium over the stock market in order to account for the increased risk, lower liquidity, and higher personal involvement.  How much of a premium?  For me the answer is at least 5-10% more than the long-term average return of the S&P 500.  Based on that, I don't see many good deals these days.

I should also say the obvious: the numbers you cite above vary tremendously by neighborhood and by the condition of the specific property relative to that neighborhood.  

@Kurtis Schreck a few things on your numbers.  Rentometer is a good start.  I would dig deeper on the comparable rents with zillow, facebook, etc.  Cast a wider net and use multiple sources, just to be sure.

Utilites at times depend on the area, especially water.  Some neighborhoods you'll find it's a standard that landlord pays.  You can always do your own thing, but also best to know what the competition is doing.  Can always go RUBS, flat fee, etc. to recapture your water bill.

Also regarding utilities, focus on what system is in place for your heating and AC with the multi.  Boiler?  Baseboard electric?  Seperate furnaces?   Depending on what's in place will determine if it's hitting your bottom line or if it's the tenant's responsibility.  

If your place is within the city limits, your garbage cost is included in your taxes and isn't a seperate fee.  Small thing, but helps a bit.  If outside city limits, check and see what garbage runs.  For my personal residence out the in burbs, it's about $25 a month.

@Todd Kalsey makes a lot of good points here. That being said, I haven't seen an open-market deal that would have a good ROI with the metrics you listed, particularly because of your expected repair costs and closing costs.

I know the market has shifted since you posted this in early March, but what's your ROI goal? I'd be happy to help you analyze deals but we need to know what your goals are before we can tell you whether or not you'll hit them.

A lot of good numbers right there! A couple of the best sources for a rental comparison is your real estate agent or property management company. They should have an understanding of the neighborhood you're investing in, and what a typical unit could go for. Happy to connect and talk more about strategy! Best of luck out there.