Hey All- I have flipped a bunch of houses in Colorado Springs, we are currently holding about 10 +doors mainly vacation rentals and we moved to Portland Oregon. Wow, so I thought the market was hot in Colorado Springs.... apparently nothing like Oregon! HOLY COW!!Anyway, we saw some good numbers being posted on a turn key out of Dayton Ohio and were wondering if anyone had any insights on that market. We are flying in to check it out in a little over a week but the turn key company is boasting returns of 20ish percent? Is that possible? We get well over that with vacation rentals but uhhh... it is some work for sure! Anyone, Dayton??? what you got? I am looking to buy anything from a 4-10plex ish thanks?
What turnkey provider are you dealing with in Ohio?
@Paige Kelsey - not that we knew each other, but I sure liked things better when you were flipping in Colorado Springs, where we offer turnkey solutions. :)
All the best!
Right key investors
@Paige Kelsey While 20% is certainly possible, my first thoughts go to three scenarios.
- The expenses are incomplete or optimistic, including
- Rehab needs to be done that is not included in the cost
- it's right in the middle of a warzone, and the numbers will be wrong.
The numbers can also be skewed by using a cash-on-cash return, instead of comparing cap rates. For example, I bought one last year with an infinite return. (I didn't put any money down) However, it only has a true cashflow of $10 per month for the first 8 years, and its cap rate is about 10%.
I'm looking at my local portfolio, and the cap rates range from 8-10% in B areas, 10-13% in C areas, and 13-15% in D neighborhoods. I have one property over 15%, it's a 20% cap rate. Those are my internal numbers that include ALL expenses, reserves, maintenance, management, vacancy, etc.
Give me a call, and we can discuss the local market before you fly in. Also, it's critical that you get a great local Property Manager. There are two good ones, and a whole bunch who are not.
@Paige Kelsey . Here is an example of what a local "turn-key" provider is currently advertising as a "deal".
- Total gross income = $9000/yr
- Taxes are $912/yr
- Insurance is $500/yr
- Property Mgt is $900/yr
- NOI is $6688/yr
- New Low Price of $27,000
- 25% ROI
The numbers look great because of what's missing. There is no allocation for maintenance and repairs, reserves for capital expenditures, vacancy & legal. Without those numbers, the given ROI is greatly inflated. A real ROI in this example would be closer to 14% or15%.
That's a nice return, and if the property is in good condition, the deal may be decent. At $750 per month rent for a 4 bed though, this one is likely in or near a D neighborhood.
Also, make sure you see the inside of any property you're putting an offer on. I spoke with a lady from out of the area recently who bought some. When she came out, she was told they shouldn't disturb the tenants, and did not go in the properties. After several months, she's still paying for the needed repairs and maintenance.
Additionally, if your turnkey provider is offering management services, make sure they are a licensed agent, per Ohio law.
Hi @Darrin Carey , I would be interested in learning the names of the two property managers in Dayton you think are great if you wouldn't mind sharing?
@Janice Kemmer is here on BP. I'll PM you the other.
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