right expectation on the return for cash flow properties in Columbus, Ohio

[Runbang Tang]

Hi Everyone,

As a first time out-of-state investor, I plan to do out-of-state investing in Columbus, Ohio. I found that normal duplexes or SFHs in C area do have cash flow, but the numbers didn't seem worth investing. For example, a duplex (in 1920s) ~ 240k, $2600 total rents with 20k rehab and 5% vacancy, 8% management and 12% maintenance, 1.37% property tax, $960 insurance, 25% downpayment and 7.25% interest rate. The overall cash on cash return is only 5.73% (with principal is 7.84%). It's way below the average return of qqq (12.5%). I want to know in this case if it is still worth investing in Columbus Ohio or if there is anything wrong in my calculation/expectation. I found that the return will be more than 12.5% when the interest rate <5%. Perhaps I should wait till the interests go down? Please share your thoughts and experience and what are the right investments to look at Columbus Ohio. Thanks a lot!

[Samuel Diouf]

Columbus is a market where you'll see a little cash-flow but the main reason investors buy in Columbus is for the appreciation that has been around 5% a year. If you factor in the appreciation, your cash-on-cash return will be a lot greater. 

If you don't want to bet on appreciation, Cleveland is another great market to look into where you'll see a much higher COC return. It still might not be 12.5% but it will definitely be higher than Columbus from a strictly cash-flow perspective.

If you wait for rates to drop, you'll be buying at a higher price point as everyone who's been waiting will start to jump back in the market. If you can, it would be better to buy now, then refi when rates drop.