conservative underwriting numbers for Columbus and Dayton, OH

[Yevgeniy Vayntrub]

Hi everyone,

I am a first time real estate investor looking at Dayton and Columbus, Ohio. I am out of state. I am looking at a bunch of deals, mostly in B/C areas. In terms of conservative underwriting and deciding what is a worthwhile deal, what numbers would people use for these areas in terms of:

Vacancy rate
Maintenance expenses
Capital expenses

I would also be using a PM. 

How long does a tenant typically stay in these properties (for conservative underwriting)? How are turnover costs typically baked into the underwriting? 

Thanks for newbie advice :)

Yev

[Alex Wright]

Quote from @Yevgeniy Vayntrub:

Hi everyone,

I am a first time real estate investor looking at Dayton and Columbus, Ohio. I am out of state. I am looking at a bunch of deals, mostly in B/C areas. In terms of conservative underwriting and deciding what is a worthwhile deal, what numbers would people use for these areas in terms of:

Vacancy rate
Maintenance expenses
Capital expenses

I would also be using a PM. 

How long does a tenant typically stay in these properties (for conservative underwriting)? How are turnover costs typically baked into the underwriting? 

Thanks for newbie advice :)

Yev

I don’t know those markets specifically, but for conservative underwriting I usually lean a little heavier on everything vs the “standard” numbers

something like:

vacancy: 8–10%
maintenance + capex combined: ~10–15% of rent (sometimes more on older properties)
PM: whatever they quote, but I still underwrite it even if I think I might self-manage

for tenant stay / turnover, I usually just assume at least one turn every 1–2 years and bake that into vacancy + a small annual reserve for turn costs

biggest thing is just not letting the deal rely on everything going right. if it still works with slightly worse assumptions, you’re probably in a decent spot. Its fun to get wooed by potential ideal numbers but don't let yourself go down that path.