First timer and Deal Sounds Too Good to be True

[Don Le]

Hi there all! I am a very first time investor and am looking at a particular property in OH. Got into this game because at the very young age of 35, my wife got diagnosed with Stage 4 lung cancer. Long story short, I realized I needed to change something. It killed me that now she is forced to go back to work even though she still is not feeling well. Anyway you're not here for a sob story but I wanted to ask for some help for my first time. My main issue with this property is that it is been bought and sold 5 times in the past 5 years. People don't hold it it for any longer than a year. It's in a very small town and I verified that the average rents are correct. My big question is that other than getting a good inspector out there, what am I missing? 

Purchase Price: $280,000

Down Payment: $75,000 (~27%)

Loan: 6.625% interest, 30-year fixed

Rents: $1,350 per side ($2,700 total, tenants pay utilities)

Property Taxes (2023): $4,247/year

Insurance: $2,600/year

Property Management: 10% of gross rent

Maintenance + CapEx: 10% of gross rent (includes reserve for roof replacement in 5 years)

Vacancy: 5%

Annual Gross Rent: $32,400

Total Operating Expenses: ≈ $13,600

Net Operating Income (NOI): ≈ $18,800

Cap Rate: ≈ 6.7%

Annual Debt Service: ≈ $16,000

Cash Flow (after all expenses): ≈ $2,800/year ($230/month)

Debt Service Coverage Ratio (DSCR): ≈ 1.17

Cash-on-Cash Return (Year 1): ≈ 3.7%

Notes:

• Roof expected to need replacement within 5 years (budgeted $10–12K).
• Tenants pay all utilities,
• Rents appear market average.
• Located in a stable B-class neighborhood with consistent rental demand.
• Population growth slightly negative but a 20 minute drive from Cincinnati. 

[Ernie Rodriguez]

If something is telling you it’s too good to be true, I usually stick with my instincts. Another deal will come around