Feedback Request: Getting Cash Flow in OKC

9 Replies | Oklahoma City, Oklahoma

Hi everyone,

I am a new investor looking to do begin a long and profitable long distance REI business.

I was hoping to get some feedback on the numbers I have been running on long term buy-and-hold SFHs around Oklahoma City. The example I am including here is in Moore, OK.

As a little background, My intended investing strategy is to buy properties in great school districts and rent them out to nice families who will hopefully take good care of the property and stay for a while. This has led me to look at properties in the following high school districts:

>Mustang

>Moore

>Westmoore

>Southmoore

>Edmund and Choctaw fit his bill as well, but the values in Edmund seem too high and there does not seem to be a lot of market activity in Choctaw (please correct me if I am wrong).

The strategy behind these numbers is to buy in cash and then perform a cash out refinance a little down the line. Executing the BRRRR strategy I believe. Anyhow, I cannot seem to get the numbers to work (even with a very low purchase price) in terms of getting a decent cashflow while not leaving any/much cash in the property.

Here is a link to my spreadsheet:

https://drive.google.com/file/d/11Kqncpzvf186H3ZT79k-YQLwUrb7Zrkx/view?usp=sharing

I have gone through to run the numbers on a number of SFHs in the area and come across the same issue. The example property that I choose for this exercise is linked in the spreadsheet, and also here:

https://www.zillow.com/homedetails/301-Christopher-Todd-Dr-Moore-OK-73160/21724583_zpid/?utm_source=email&utm_medium=email&utm_campaign=emo-sendtofriend-hdp&rtoken=f8e8cae0-6504-4b77-955d-a4d46f9ef4cd~X1-ZUwc7v4kuhxiix_82rpg

My first assumption is that the holding expenses I have collected are off, but I am sure there could be a myriad of things that I am missing.

I know there are a lot of you out there who ARE making the numbers work, so I would very much appreciate any/all advice!

Many thanks,

David

Looking at that particular example, it appears your rent might be on the low side and expenses on the super high side (your capex/vac/misc is at 40% of your gross rent almost). I like that purchase price, tho.

Originally posted by @Victor S. :

Looking at that particular example, it appears your rent might be on the low side and expenses on the super high side (your capex/vac/misc is at 40% of your gross rent almost). I like that purchase price, tho.

This is really useful, thank you.

I got the rent price from doing some comps on Zillow. Do you have a more reliable source for rental comps in the area? I just plugged the address into Rentometer and got back $1,531.

Would you share your percentages for expenses that would be more or target? Here is what I had:

-Vacancy: 12% of rent

-CapEx: 17% of rent

Thanks so much!

David

David, house of that size in Moore should pull at least $1.5k. Since you're rehabbing a property, I would not expect your capex and maintenance items be that high, but if that makes you feel more confident, keep running your numbers as you see fit. With BRRRR, you get your money back, and the c-o-c becomes infinite (if positive), since you have $0 in the deal. If you can get all of your money back at a conservative 65-70% refi, even better. One thing you can't escape are PM fees, since you're doing this oot, unfortunately.

Agreed, I would much rather self manage initially, but not being local I don't have much choice. 

Are you pulling the $1.5k rent estimate from an online resource, or from experience? I checked a lot of sites (Zillow, Trulia, City-data) and found very few homes above $1.4k. I also ask so I can add it to my analysis process. 

Originally posted by @David Groemping :

Agreed, I would much rather self manage initially, but not being local I don't have much choice. 

Are you pulling the $1.5k rent estimate from an online resource, or from experience? I checked a lot of sites (Zillow, Trulia, City-data) and found very few homes above $1.4k. I also ask so I can add it to my analysis process. 

 Just have a general idea about that area. Check the following link for homes around that area over 1800 sq. ft. Looks like you're well in that rent range: https://www.zillow.com/homes/for_rent/1800-_size/3...

Based on your ARV your rents are definatly too low. This however is usually the case with SFH rentals in "great school districts". Positive cash flow on SFHs is low at best so when you move into popular districts home buyers will tend to push up values. It is not generally a investor friendly environment for those seeking positive cash flow.

SFH investing is primarily speculating on appreciation and benefiting from a mortgage pay down play. With luck tenants will cover the costs but it is not unusual for investors to need to contribute out of pocket to cover cost shortfalls.