Looking for advice: seeking B-class SFH for buy and hold
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votesI don't know the Cincinnati market specifically, but if you're not finding anything that cash flows... you're probably analyzing it correctly. Almost nothing on-market cashflows right now in any market.
Just curious where you live and how you chose Cincinnati. I encourage people to invest either where they live, or within an hour or so, because there are so, so many threads on BP from folks who bought a random OOS property just to "get a deal" and immediately regretted it.
16 Replies
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
I don't know the Cincinnati market specifically, but if you're not finding anything that cash flows... you're probably analyzing it correctly. Almost nothing on-market cashflows right now in any market.
Just curious where you live and how you chose Cincinnati. I encourage people to invest either where they live, or within an hour or so, because there are so, so many threads on BP from folks who bought a random OOS property just to "get a deal" and immediately regretted it.
- Rental Property Investor · Cincinnati, OH · Member since 2023 · 62 posts · 35 votes2y
Quote from @Wayne Lee:
First time Cincinnati investor giving it a shot from out-of-state, currently in early stages and looking for advice.
Current parameters are: seeking B-class 3bd/1.5ba SFH for buy and hold (possibly BRRRR), $150-250k. Hoping for good neighborhood, good schools to attract low-maintenance family tenants. Would like to do minor rehab to get my feet wet working with contractor, but nothing major. Risk tolerance is fairly low as I'm still gaining experience.
So far, having trouble finding properties that meet 1% rule or seem to cash flow. Not sure I'm nailing the analysis.
My questions: are there still cash-flowing B-class properties to be had in areas like Pleasant Ridge, Norwood, Walnut Hills? Do I need to adjust my price range? (I have some room to go up.) What's the sweet spot?
I agree with Nicholas. I would be looking locally first, especially with your first deal. Doing it this way you will have to be putting alot of trust with Agents, GCs and anyone visiting the property for you.
There is a lot of local and out of state investors who are currently buying the low inventory. With that being said good luck finding anything that will meet the 1% rule unless you are looking in C- and below areas.
Cincinnati is also very block by block / street by street. There is alot of gentrification going on but you can really lose out on an investment if you have someone untrustworthy helping you out. The areas you have listed are the more primo neighborhoods with higher price points.Good luck!
- 2yMin ZhangBusiness MemberReal Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
Hi Wayne, since you're investing out-of-state, my advice for you is to read this book “Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties” - I found it to be very helpful when I got started investing 2.5 years ago.
Here is a summary of the book.
https://www.nateliason.com/notes/long-distance-real-estate-investing-david-greene
The book also mentions the importance of having a rockstar Realtor, contractor, lender, and property manager.
Let me know how I can help! - 2ySam McCormackBusiness MemberReal Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
Quote from @Wayne Lee:
First time Cincinnati investor giving it a shot from out-of-state, currently in early stages and looking for advice.
Current parameters are: seeking B-class 3bd/1.5ba SFH for buy and hold (possibly BRRRR), $150-250k. Hoping for good neighborhood, good schools to attract low-maintenance family tenants. Would like to do minor rehab to get my feet wet working with contractor, but nothing major. Risk tolerance is fairly low as I'm still gaining experience.
So far, having trouble finding properties that meet 1% rule or seem to cash flow. Not sure I'm nailing the analysis.
My questions: are there still cash-flowing B-class properties to be had in areas like Pleasant Ridge, Norwood, Walnut Hills? Do I need to adjust my price range? (I have some room to go up.) What's the sweet spot?
Hey Wayne, shooting you a message now
Sam McCormack Realtor - Member since 2023 · 11 posts · 10 votes2y
Thanks for the replies so far. @Min Zhang, I did read David Greene's "Long-Distance Real Estate Investing" and am using it as my primary guide. @Isaiah Lopez-Torres your comments were helpful. I live in the Seattle area so investing locally is difficult; I chose Cincinnati because my wife is from there and my in-laws still live there. How much would I have to increase my price point to start finding viable properties in B-class neighborhoods?
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
can you house hack in Seattle? and/or
can you pick a market 1-3 hours away from Seattle and look there? and/or
can you travel to Cincinnati every other month for the next 6-12 months building your network and looking at properties in person?
- Member since 2023 · 11 posts · 10 votes2y
Quote from @Nicholas L.:
can you house hack in Seattle? and/or
can you pick a market 1-3 hours away from Seattle and look there? and/or
can you travel to Cincinnati every other month for the next 6-12 months building your network and looking at properties in person?
Thanks for the ideas. House-hacking is out because I have a young family.
A market 1-3 hours away is possible but still tough. I have a friend who's starting BRRRR in Tacoma, but he has more investment capital to start and hired a real estate coach. I picked Cincy because I thought it would be easier.
Re: traveling - David Greene's Long Distance Investing book makes an argument that I shouldn't need to. I won't be able to travel much when my day job starts again in a month anyway.
Happy to hear a strong counter-argument. I'd love to have someone change my mind.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Wayne Lee When rates were super low 2 years ago, and prices hadn't totally spiked, many investors got lazy because almost they could buy anything on the MLS at asking price and cashflow as a rental.
As prices went up, many investors started investing in STRs to get properties at asking price to cashflow.
Now, many are chasing Class C properties to get them to cashflow at asking price.
What consistencies do you see in all three of those scenarios?
The most important one is, "at asking price"!
Prior to the Great Crash of 2008, most investors looked at & analyzed 100 properties, to make 10 lowball offers (so the property cashflowed) to hopefully get one accepted.
Not many investors want to work that hard today.
They'd rather invest in high-risk Class C properties and take their chances, as opposed to doing the hard work mentioned above!
---Then, when their high-risk Class C investments doesn't deliver Class A results - they blame their PMC, agent, etc. - but, RARELY themselves.Now, what are you going to do to find a Class B rental that cashflows?
Logical Property Management4.9446 Reviews - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
To get a B-Class that cash flows is all about the initial purchase price and the amount of leverage. People say cash flow as if 20% down will always do the trick, we're not in 2010-2022 anymore. We're in a high rate era, you need to put more down or put more into the property to get it to cash flow.
Don't read stuff from 2010-2020 and ask why it isn't working like this anymore. REI is a different ball game.
Best advice is to buy distressed, fix up, and rent it out.
- Member since 2023 · 11 posts · 10 votes2y
Quote from @Michael Smythe:
@Wayne Lee When rates were super low 2 years ago, and prices hadn't totally spiked, many investors got lazy because almost they could buy anything on the MLS at asking price and cashflow as a rental.
As prices went up, many investors started investing in STRs to get properties at asking price to cashflow.
Now, many are chasing Class C properties to get them to cashflow at asking price.
What consistencies do you see in all three of those scenarios?
The most important one is, "at asking price"!
Prior to the Great Crash of 2008, most investors looked at & analyzed 100 properties, to make 10 lowball offers (so the property cashflowed) to hopefully get one accepted.
Not many investors want to work that hard today.
They'd rather invest in high-risk Class C properties and take their chances, as opposed to doing the hard work mentioned above!
---Then, when their high-risk Class C investments doesn't deliver Class A results - they blame their PMC, agent, etc. - but, RARELY themselves.Now, what are you going to do to find a Class B rental that cashflows?
Thanks for the context and the advice! Definitely not afraid of the work - just happy to have a path forward and to know that you think it's possible in the current environment.
- Member since 2023 · 11 posts · 10 votes2y
Quote from @V.G Jason:
To get a B-Class that cash flows is all about the initial purchase price and the amount of leverage. People say cash flow as if 20% down will always do the trick, we're not in 2010-2022 anymore. We're in a high rate era, you need to put more down or put more into the property to get it to cash flow.
Don't read stuff from 2010-2020 and ask why it isn't working like this anymore. REI is a different ball game.
Best advice is to buy distressed, fix up, and rent it out.
Helpful to hear confirmation that REI is different today compared to when the books I read were published. Starting to see some viable distressed properties today so there's hope. Thanks for taking the time to write.
- 2yNoah WrightBusiness MemberUSA, Nationwide · Member since 2024 · 162 posts · 86 votes
Hi Wayne,
There's creative financing possible in the interest of cashflow. With regards to this, I'd like to make two points for your benefit, based on what you're saying.1. Interest Only Loan - This allows you to avoid negative cashflow in your monthly budget. You are also able to pay down the principle as is comfortable, while only the interest is "due."
2. The bulk of long-term returns (often, ideally) come from capital appreciation - not necessarily the rent roll. This is especially true the finer the market is.
I see a lot of different strategies from serial investors I work with regularly, and would be happy to learn more about your finer details as such. Have you sought to identify the general areas being gentrified in this market? A very nice way to grow wealth is to buy amidst a mid-gentrifying neighborhood and "riding the wave" as things appreciate dramatically. Perhaps some high-volume local realtors would have some invaluable insight into this market. Couple that with an interest-only note to lighten the immediate-term financial burden of the investment, we are really looking at an interesting long-term phenomenon.
Now if we are to layer in a light "face-lift" into the equation, we could walk into 10-20%+ equity out of the gate. Perhaps refinance that out and use it as collateral for a second property this/next year.Very best regards,
- Member since 2024 · 238 posts · 132 votes2yI think the analyses above are correct on getting these little properties to cash flow. It just can't be done today. And, speculation in the Cincinnati market is not a great idea since we have not YET experienced any serious rollback of prices and the market is becoming saturated with apartment newly available.
I think you have to get into the larger properties (16+) to find the B class properties with positive cash flow and those are typically hidden by pocket listings. So boots on the ground helps a lot. - Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2y
Quote from @Wayne Lee:
Quote from @Nicholas L.:
Re: traveling - David Greene's Long Distance Investing book makes an argument that I shouldn't need to. I won't be able to travel much when my day job starts again in a month anyway.
Happy to hear a strong counter-argument. I'd love to have someone change my mind.
Yes, in theory, you should not need to. Reality looks different. But even if that theory is correct, your business is dealing with a general overheard burden that local investors don't have.
- you can't swing by to really understand what's going on.
- this leads to management inefficiencies and waste
- you have to rely on other people's judgment
- you have an overhead cost burden for doing things remoteIt is tough enough to organize a carpet & paint rehab remote (ask anyone who did it the first time), let alone a full-scale BRRRRR. I have been BRRRR-ing for over a decade in Milwaukee and if I don't check on the job at least twice a week, things slow down and/or go wrong. And for anyone who says we have bad contractors, consider that every builder has a construction manager, who does nothing but keep jobs moving, coordinating between trades and monitoring quality.
I am a die-hard real estate investor, so it takes me quite a bit to say this: given the remote burden on your ROI, maybe an S&P500 index fund will deliver you better returns for much less headache?
A close-to-move in ready property is much more feasible for OOS. Frankly, even local: the last 3 properties I bought were all in close to move-in-ready condition, because currently, I can't get enough discount on a property in a desirable area to pay for the necessary repairs and upgrades.
The radical solution: move to Cincinnati, even the playing field and become a local investor.
- 2yDenis PonderPro MemberNew to Real Estate · Yuma, AZ · Member since 2023 · 280 posts · 246 votes
Quote from @V.G Jason:
To get a B-Class that cash flows is all about the initial purchase price and the amount of leverage. People say cash flow as if 20% down will always do the trick, we're not in 2010-2022 anymore. We're in a high rate era, you need to put more down or put more into the property to get it to cash flow.
Don't read stuff from 2010-2020 and ask why it isn't working like this anymore. REI is a different ball game.
Best advice is to buy distressed, fix up, and rent it out.
@Wayne Lee This up above is really solid!
I bought a property outside of Detroit off the MLS. It hasn't cash flowed yet. Additionally, I wasn't able to get the original rent amount I estimated, so that had an impact on the deal. Lessons learned along the way.
I pivoted to buying distressed and fixing them up. This came with a different set of challenges and lessons learned, but I'm happy I did. I will have a few properties that cash flow solid with some solid equity in them, too.
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