Ohio Cashflow and Oz Realty Review
My experience:
Bought: March 2021, $64,900
Sold: April 2024, $48,500 - $5,000 (agent fees/closing fees/etc) = $43,500
Rental income (rents - expenses): $5,600
Average annual returns: 2.9% (approximate)
Net loss at sale: $15,800
Positives:
1. It was turnkey, but:
a. I had to ask questions to get explanations about frequent repairs. (For properties of this age, months requiring some kind of repair seemed as common as months where nothing needed to be done).
b. I had to make sure that the repairs/renovations promised at the time of purchase were actually completed. (It took almost a year, and frequent inquires, to make sure they were fully completed.)
c. I had to deal with my insurance company to get one month of rent reimbursed for the first tenant that ultimately had to be evicted.
2. Lonna
Lonna, the woman in charge of property management, is amazing. The one truly great thing I can say about Oz Realty is Lonna. She's kind, diligent, and professional. She responds to questions in emails line-by-line. I really appreciated her efforts and would hire her to work at my company in an instant.
Negatives:
1. My cap rates weren't near what was advertised. To be fair, Engelo did say cap rates would probably be a couple percentage points below what he advertised through his frequent marketing emails. The property I purchased had an advertised 9% cap rate. I would have been happy with 6-7% annually, but real cap rates were about 3%. I can imagine they'd average out at about 2.5-4.5% over time (5% in a rare great year), but not close to 6%. I asked Engelo about this after an initial period of muted returns:
Engelo: "You need to buy more properties to see higher annualized cap rates."
Me (thinking to myself): Even if I have 10 properties averaging 4%, that's still only going to add up to 4% on average.
2. I had high tenant turnover. (Oz Realty charges a one-month placement fee which does eat into returns over time. If the first tenant leaves within the first year of ownership, Oz Realty waives the one-month fee.)
My first tenant had to be evicted. He paid a month, skipped payment a month, paid for a month and a half (one month being the unpaid month), negotiated payment for upcoming months, lied about what he said he'd do, made a partial payment, promised to pay unpaid rent, then ultimately skipped out without paying for multiple months of rent. More than four months rent were lost between missed rent payments and legal fees to evict the tenant.
The next tenant was much better, but had frequent complaints regarding legitimate problems:
-bathroom sink hot water knob that didn't work
-rat urine smell coming from the vents
-water leakage from the toilet
(I understand that problems occur, particularly with properties of this age, but it was surprising/disappointing considering I paid Ohio Cashflow $64.9k for a property they bought for almost half the price, then, even after having done improvements, still required frequent repairs.)
3. Property appreciation
I bought the property for $64,900 and sold it for $48,5000.
The real estate agent throughout the sale process: "The markets have come down since you bought your property."
Me (thinking to myself): If that were the case, why do I keep getting Ohio Cashflow marketing emails for similar properties at higher prices than what I paid for?
4. Depreciation for tax purposes
The amount of annual depreciation OVERLY offset my net income on the property. Because the property's annual net income was so small, in some years the depreciation which offset net income was too much. Meaning, when it came time to actually sell the property, (for tax purposes) the cost basis of the property was reduced by the full depreciation amount, reducing the amount of capital loss (which could be used to offset more profitable investment).
5. The real estate agent that "helped" me sell the property wasn't helpful or easy to deal with. The most lucrative option Ohio Cashflow offered me was to use their real estate agent. I'll refrain from mentioning her name, but she was at times rude, unhelpful, forgetful, unresponsive, and incompetent. (I can understand that a real estate agent deals with a lot of clients, but she frequently forgot the simplest of details of what we spoke about, and often failed to follow through on the things she said she would do.)
6. I had to pay unpaid water bills when the tenant that needed to be evicted up and left. Because the property's water bills were not registered in the tenant's name, I had to pick up the bill. The bills were in the amount of about ONE AND A HALF MONTHS RENT.
7. I should have been smarter. Honestly speaking, I like people that speak frankly, so I was probably a sucker for Engelo's "if I swear a lot I will appear like a straight shooter" delivery. He used scarcity to get me to buy. It worked.
Engelo: "I have too many clients already and I'm actually thinking about not taking any more on." I can only guess this is untrue because of the regular "buy one of our properties" marketing emails I continued to receive, even after having purchased a property.
8. The overall property condition was worse than I imagined. Prior to selling, the buyer's inspection turned up significant mold damage to the property's foundation due to water leakage. This resulted in a substantial $2500 reduction in the sale price.
In summary:
The place I bought from Ohio Cashflow was an old, broken down home that required frequent repairs despite having "significant" improvements at the time of purchase. I was advertised 9% cap rates, told to expect 7%, but actually got around 3%. I couldn't realistically imagine getting 5% returns, so I sold. At the time of purchase I was not expecting property appreciation, but based on my purchase price, I can't imagine seeing any appreciation, even after 15-20 years.