Real Estate Investing Forums

Real Estate Investing => Rehabbing, Fix and Flip, Rental Properties => Topic started by: dbassett74 on September 29, 2005, 02:51:03 pm

Title: Ohio a good place to buy then rent out?
Post by: dbassett74 on September 29, 2005, 02:51:03 pm
Seems like Ohio has pretty low prices still and prices are actually falling due to over-supply.  What are rents going for like in the Clevland and surrounding areas?  I live in California so I really need to buy something that's ready to rent out.  I've seen some rediculously low prices in Clevland, at least compared to So Cal prices.  I have about 200k equity in my house and really want to do something with it, like purchase a few income properties.  Is it un-realistic to purchase properties out of state?  Any advice would be appreciated.
Title: Re:Ohio a good place to buy then rent out?
Post by: amusedtwinkle on September 29, 2005, 02:58:38 pm
I live in So. Cal and am currently looking @ other states to invest in,   Any suggestions on good cities and/or states for rentals?? regarding owning properties in other statesI would suggest just making sure you get a good property management co.  
Title: Re:Ohio a good place to buy then rent out?
Post by: carlosguti on September 29, 2005, 05:24:34 pm
I came online today, to ask this very question.
Is it recommended to invest in out of state properties, It has proven very difficult to find a property in Illinois to make a positive cash flow.
Title: Re:Ohio a good place to buy then rent out?
Post by: dbassett74 on September 29, 2005, 06:05:24 pm
My thought is that to get a positive cash flow, you need to purchase in a buyer's market to take advantage of lower prices.  I know Ohio is one such place right now.
Title: Re:Ohio a good place to buy then rent out?
Post by: carlosguti on September 29, 2005, 06:46:39 pm
I will look at Ohio then, thanks
Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on September 29, 2005, 07:09:17 pm
Hey Guys,

I'm right here in Ohio, I have experience, and I'd be happy to help!  It's easy to invest 3,000 miles away.  Send me a BIG check and I'll buy you a bunch of properties for 70 cents on the dollar.  You hire a management company and when you're ready to cry uncle - I'll even buy them back from you (for 40 cents on the dollar)!!!  

It's already happening.  We L O V E California Buyers!!!

Mike
Title: Re:Ohio a good place to buy then rent out?
Post by: carlosguti on September 29, 2005, 11:31:25 pm
Mike im in Illinois.. Not 3000 miles im right next door!
Title: Re:Ohio a good place to buy then rent out?
Post by: dbassett74 on September 29, 2005, 11:58:24 pm
Hey Guys,

I'm right here in Ohio, I have experience, and I'd be happy to help!  It's easy to invest 3,000 miles away.  Send me a BIG check and I'll buy you a bunch of properties for 70 cents on the dollar.  You hire a management company and when you're ready to cry uncle - I'll even buy them back from you (for 40 cents on the dollar)!!!  

It's already happening.  We L O V E California Buyers!!!

Mike

Not sure if you're being serious or not.  Is this really happening??
Title: Re:Ohio a good place to buy then rent out?
Post by: star on September 30, 2005, 12:42:28 am
Hi everybody,

If you are interested in investing in a property in Ohio, please send me an email.  I am currently investing in Ohio and I live in California.  I have a partner who finds the deals, handles the repairs and the sale afterward.  I am the money person.  We split profit 50/50.  It just depends on what you want to do.  He will also just flip property to you and you deal with repairs and sale and so forth.  

He has a good deal right now if anybody is interested .

Thanks!
Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on September 30, 2005, 06:12:01 am
dbasset,

Yes, I was being serious.  We do have a LOT of California buyers here already (we jokingly call them the VICTIMS).  They've been watching too much late night TV and actually believe that they can buy a house long distance, sight unseen, have an unseen manager take care of it.  Then, they just sit back and collect the checks.  It would be funny if it weren't so sad.  

Here's what typically happens.  The VICTIMS buy a house without ever seeing it (except in pictures) and they get a small discount (maybe 80% ARV).  The house needs a lot more repairs than they saw in the pictures.  The VICTIM hires a property manager who charges 10% of the gross rent, which is more than 30% of the positive cash flow.  They can't rent the house as-is and after they get jerked around by a terrible contractor, they can't afford to finish the rehab.  I buy the house at the sheriff's sale at half what they paid for it .(thank you for doing most of the rehab).  OR they actually get the house rented and after the crackers have destroyed the house the second time, I buy it for 50% of what the VICTIM paid.

People are SOOOOOOOO gullible.

It is VERY difficult to manage property if you live 5 minutes away.  It is nearly impossible to find a property manager that will do it as well as you could.

The only thing that I could think of that would be crazier than doing the above would be to send your money to someone that you don't know but just met on an internet website.  How many of you guys contacted Star?  There's a sucker born every minute.

Mike  
Title: Re:Ohio a good place to buy then rent out?
Post by: star on September 30, 2005, 11:03:44 am
Gee, Mike, thank you for the compliment.  You have such a nice personality. I will remember to hire you and send you a "big check" when I become desperate.  Make sure you provide us with your management company name so all us "suckers" who read these posts everyday to network and make our connections via the internet know who to call when our investments fail, after all im sure all of us will fail to do our due diligence,  use contracts, background checks, etc.

You are soooo smart, what would we do without you!
Title: Re:Ohio a good place to buy then rent out?
Post by: dbassett74 on September 30, 2005, 11:55:15 am
dbasset,

Yes, I was being serious.  We do have a LOT of California buyers here already (we jokingly call them the VICTIMS).  They've been watching too much late night TV...

I appreciate the insight.  I could definitely see this happening because us Californians have tons of equity in our houses.  We want to invest, but can't invest in anything locally because everything is too expensive.  It's VERY discouraging that I can't seem to do anything with my loads of equity.  I really want to invest in something, but there is just no way I can invest in anything within 500 miles of where I live.  It's just TOO expensive.  So I just thought that Ohio might be a good place.  But, as your post pointed out, it isn't quite that simple.  Story of my life, I guess I'll just let my equity rot away as the bubble begins to burst and continue working a crappy 9-5 job the rest of my life.... So depressing... :-[
Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on September 30, 2005, 03:57:25 pm
dbassett,

Did you ever think of moving?  If your goal is truly to invest in real estate, why not move to where the investing environment is what you need?  I'm convinced that the vast majority of the country (flyover country) has excellent opportunities for investing.  You could sell here near the top and re-invest in a new area.  

I didn't elaborate earlier, but there is a house right across the street from one of my rentals that is owned by a California investor.  I've already tried to buy it once, but he wasn't desperate enough.  I think that a family member is "managing" it or perhaps "not managing" it would be a better way to say it.  It has a wrap around porch on the roof.  At any rate, the windows are broken out, the dog was living on the roof, and one day an entire toilet flew out the upstairs window and landed on it's new home on the lawn, where it stayed for a month.  The facia is falling off the porch and the grass was a foot high for over a month.  I tried to buy it for $20K but the owner still wants $40K (as I recall he paid $50K - ARV is 60K).  I still expect to get it, but it will take a little more time.  In my experience, this is typical of out of state investors.  In fact, out of state investors are one of the criteria I use to target motivated sellers.

Good Luck,

Mike    
Title: Re:Ohio a good place to buy then rent out?
Post by: dbassett74 on September 30, 2005, 05:06:21 pm
Wow, that was definitely some entertainment right there!  I appreciate you telling it like it is.  No sense in sugar coating it like they do on those late night informercials.  That's sorta like that COPS show.  My uncle who is in law enforcement says it's completely sugar coated, you don't see the REAL crap that goes on behind the scenes.  Same situation here.  Those late night informercials show examples of people buying things for $500 and selling for $1500, but they don't tell you it took $5,000 worth of repairs!

Any who, at least I've gained a whole new perspective on this before I dive into it.  It's not that I don't want to do it, but I definitely will think twice about how to go about doing it.  I have always been one to want to do things myself, if I could.  I can't remember the last time I was even remotely satisified with the work that a so-called professional has done for me.  I had a new HVAC system installed in my house and it was a complete disaster.  The unit wasn't even level so the water didn't drain properly.  It took me all of 5 minutes to put some shims in there and level it.  But it's crap like this that can turn into a disaster.

Have thought about moving, but I love it too much where I'm at.  I probably wouldn't mind moving for several months at a time but still keep my house in Cali.  Do you think it would be realistic to move temporarily into the house that I'm rehabbing so that I can control the whole project and then find a good property manager to just collect the rents while I'm back in Cali?  Or do you think it's critical that I live near my rentals?  I guess I could always just flip and not rent...
Title: Re:Ohio a good place to buy then rent out?
Post by: dbassett74 on September 30, 2005, 05:09:53 pm
BTW, are there plenty of Home Depots or Lowes out there?? Are material prices pretty good?  I'm very spoiled here in Cali where we have everything we need within a 1 mile radius.
Title: Re:Ohio a good place to buy then rent out?
Post by: 4EEM on September 30, 2005, 05:26:30 pm
I'm a Realtor and a Loan Officer in Columbus Ohio.  If you want info about REI in Ohio I am probably your number one source on this board.  

Yes.  Cash Flow exists in Ohio,  It's actually great cash flow.  

If you are looking to make purchases in Ohio I strongly suggest the Columbus Metro market for rehab flips and  if rentals are what you are looking for just go up High street a few miles to the Ohio State Univesity Campus.   The largest university in the US with 50,000 + students.

Cap rates on rental properties range from 8% to 12%.

If you would like any market information feel free to contact me.

Regards,
Pat Lawson
Title: Re:Ohio a good place to buy then rent out?
Post by: rballard on September 30, 2005, 05:31:51 pm
Plenty of rental properties at low, low prices here in Northeast Pennsylvania. PM or email me if you'd like to talk.
Title: Re:Ohio a good place to buy then rent out?
Post by: 4EEM on September 30, 2005, 05:36:16 pm
I just read property managers  posts.... :'(

You should know that many of the owners of student rentals at OSU are out of state owners and they do quite well.  If you would like information about some of the property management companies around the OSU campus visit.

http://campuspartners.osu.edu/

or

http://offcampus.osu.edu/landlord.asp

Again,
Feel free to call with any questions.

Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on September 30, 2005, 08:18:52 pm
Cap rates on rental properties range from 8% to 12%.


Pat,

What the heck is cap rate ???
Title: Re:Ohio a good place to buy then rent out?
Post by: carlosguti on September 30, 2005, 08:25:14 pm
4eem i am going to Cleveland this month, I would love to look at some properties. Please email me.
Title: Re:Ohio a good place to buy then rent out?
Post by: Dell Investor on September 30, 2005, 11:13:05 pm
RBallard,

Where in NE Penn r u talking about?  Oh, FYI, my entire family is from Scranton/Dunmore/WikesBarre...............I am very familiar with that area....

Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on October 01, 2005, 06:44:58 am
Sunny,

Cap rate is a ratio of income to value.  More precisely Cap rate = Net Operating Income (NOI) divided by Purchase Price.  Net Operating Income (NOI) is gross rent minus all expenses EXCEPT the mortgage (P & I).

For example, if the yearly net operating income for a property is $10,000 and the property cost $100,000, then the cap rate is 10%.

Many investors use this formula to decide what to pay for a property.  They do this by dividing their expected NOI by the cap rate they desire to get the expected purchase price of the property.  

A higher cap rate gives you a higher rate of return.  

Here's a real life example (I rounded to make it simpler).  

I have a 6 unit apartment building that I paid $88,000 for.  The NOI is $19,000.  This gives a cap rate of 22%.  GREAT - right?  Answer - no, it's pretty good but not great.  I borrow all my loans with a 20 year term and the mortgage payment per year is 8,000.  This leaves an annual positive cash flow of $11,000.  Great - right?  Again no, it's pretty good but not great.  How much is that per unit per month  -  only $152!!!  This is with me managing the building myself.  

If I paid a 10% (of gross rent) management fee, that would take about $2,500 off my profit (gross rents are $25,000).  Throw in the added expense for maintenance that you'll be paying, higher insurance for student housing and drunken students trashing the place on a regular basis, and what do you have left?  My estimate is that the cash flow would be reduced to $6,500.  Now, we're down to only $90 per unit per month.  This is at a cap rate of 22%!!!

Now, buy the same apartment building with a cap rate of 8-12% as 4EEM suggests and what do you have???  You do the math!

Managing the building yourself and being able to do minor maintenance makes all the difference in the world.  

Mike



Title: Re:Ohio a good place to buy then rent out?
Post by: 4EEM on October 01, 2005, 08:51:38 am
When I figure cap rates I expense with property management, Maint and Rehab.

Management: 7%
Yearly Rehab: 6%
Yearly Maint:   5%


"I have a 6 unit apartment building that I paid $88,000 for.  The NOI is $19,000.  This gives a cap rate of 22%.  GREAT - right?  Answer - no, it's pretty good but not great.  I borrow all my loans with a 20 year term and the mortgage payment per year is 8,000.  This leaves an annual positive cash flow of $11,000.  Great - right?  Again no, it's pretty good but not great.  How much is that per unit per month  -  only $152!!!  This is with me managing the building myself."

Using property managers example of $88,000 purchase price, $19,000 NOI and assuming 20% downpayment with an 8% interest rate on a 20 year term you have a 67.81% return on investment.  

Any one have any stocks or bonds that have an annual ROI of 67.81%?  

How many people do you know that are sucking dust on rentals banking on market appreciation?

With the numbers that property manager is showing he could put his $88,000 property on the market for $160,000 and have it sold in less than 45 days easy.  

But hey, "it's pretty good not great" I'll give you $120,000 for it.

 8)
Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on October 01, 2005, 09:15:12 am
Pat,

Actually, my return on investment is infinite, because I didn't have any money out of pocket.  I deal with small, local banks that will loan based on the appraised value of the property, not the purchase price.  I have yet to find a mortgage broker that can do this.  (I don't know about others on this board, but if I had to put down 20% on every deal, I either wouldn't have many properties or wouldn't have any reserve.)  This property appraised at $135,000 but I wouldn't sell it.  I'm in this business for the cash flow and I consider $152 per month per unit VERY marginal.  Personally, I would't do this deal if I had to use a paid property manager or had to hire out minor maintenance.  It doesn't take many service charges at $50-$60 a pop to destroy your cash flow.

You can't take any one factor (such as rate of return, cap rate) on a property and decide whether it is a good deal.  In my above building, even if my total annual profit were $1, I would still have an infinite return because I don't have any of my money in the deal.  However, a $1 profit certainly wouldn't justify the risk of being in business.  

What's more, my point is that California investors are foolish to come all the way to Ohio to invest when there are 3,000 miles of good deals between here and there.  Personally, I'd like to be close enough to my investment to check up on it once in a while.  

Mike
Title: Re:Ohio a good place to buy then rent out?
Post by: 4EEM on October 01, 2005, 09:38:23 am
Mike,

Many of the  multi-unit rental properties being purchased in Columbus are being bought by investors from CA and DC.  I do not see these properties going to the auction.  

I'm not proposing that anyone do anything that is not already being done.  

IMHO if your going to invest in rental properties it is better to do so with a responsible property manager in another state than to sink money into a property with negative cash flow a couple blocks away.  

"...local banks that will loan based on the appraised value of the property, not the purchase price.  I have yet to find a mortgage broker that can do this."  I can... If you've got great credit, you don't actually need the loan to purchase the property and the property has great cash flow.

 ;)
Title: Re:Ohio a good place to buy then rent out?
Post by: 4EEM on October 01, 2005, 09:51:27 am
I just want to note that I respect Mikes opinon.  I have my professional opinons and Mike has his.  At the end of the day any investor must know what amount of risk they are willing to subject themselves to and for what potential return.  

Face it.  Some people get burnt in real estate and others do very well in the long-term.  Real estate is not the best investment vehical for everyone.  The bottom line is this:  If you do decide to invest in Ohio there are capable people here to give you support.

Best wishes from Ohio.
Pat Lawson
Title: Re:Ohio a good place to buy then rent out?
Post by: rballard on October 01, 2005, 11:13:25 am
Dell Investor:

I'm in Dunmore. My main market is the areas around Scranton, which I'm most familiar with, but I have decent knowledge about the Wilkes-Barre area too.
Title: Re:Ohio a good place to buy then rent out?
Post by: carlosguti on October 01, 2005, 11:21:48 am
The lowest 6-unit I have found in my area was for $319,000'
Ohio might be good after all
Title: Re:Ohio a good place to buy then rent out?
Post by: Dell Investor on October 01, 2005, 12:36:37 pm
RBallard,

I don't see much appreciation in that market.  Prices have pretty much stayed the same as far as I can tell.  Unless I have missed something.  Do you purchase in that area to earn rental income as opposed to the appreciation?

Now I do know that some area in Pike County have appreciated nicely.
Title: Re:Ohio a good place to buy then rent out?
Post by: rballard on October 01, 2005, 04:11:38 pm
Dell, you're totally right. If appreciation is what you're looking for, Scranton-Wilkes-Barre is a bad place. But here's the scoop on rentals: You could pay retail (which who does that?) right now and still cash flow above minimal margins. For example, a 100k property (retail price) would gross $11-1200 month for two units. So if you had a traditional loan, your mortgage would be what, $650-700/mo? Obviously there are other cost factors, but as you can see, there's plenty of wiggle room. As far as rehabs, which is my main thing, there are plenty of distressed properties... some in good rental areas, some in good resale areas and of course ones you don't want.
Title: Re:Ohio a good place to buy then rent out?
Post by: Dell Investor on October 02, 2005, 01:28:23 pm
RBallard,

Just curious but how is the Greenridge section holding up these days?
Title: Re:Ohio a good place to buy then rent out?
Post by: rballard on October 02, 2005, 01:49:44 pm
Greenridge is definitely the nicest part of Scranton. There a few houses scattered about that could use some fixing up, but for the most part it's a nice area. Scranton is mostly full of renters, but Greenridge attracts buyers, due to its nice Victorians and Cape Cods. In fact, I saw in Greenridge the other day that they've started building some condos... based on the starting price (I think it's like 220k) they should be pretty nice. I can't tell exactly how many they're building, but it's a base of five... nothing on the sign to indicate if it's just one row.
Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 03, 2005, 02:40:42 pm
Mike (PropertyManager),

Thanks a lot in helping me understand this game (Not that I understand it fully anyway now).

Couple of Q's for you:

1. Why do you borrow all your loans with a 20 year term ?

2. What percentage interest did you figure for that Mortgage ?

3. When you say 19000 is NOI with gross rent of 25000, that means it costs you 6000$ to do maintenance and other nuisance of maintaining the property? Are these repairs mainly ?

4. How many hrs per week, per day, per month does it cost you to hold this property?

5. "Throw in the added expense for maintenance that you'll be paying, higher insurance for student housing and drunken students trashing the place on a regular basis".

Is this cost not included in 6000 $ mentioned in 3 above ?

6. Do you do anything else as well other than maintaining this property (and other properties) as well, I mean do you have another full time job as well?

See, I am not a very handy man and 'will' need someone to do all this. What that means is that I will have to get properties at cap rate of 30 to 35 % in order to make any money.

With pros like you working at 20% cap rate, I do not see any chance of survival out there  :(

Are cap rates for commercial different than residential. Somone sent me some comercials which are leased and occupied with cap rates of 10% etc. Is this a different animal ?

Sunny

Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 03, 2005, 02:51:34 pm
Pat,

I am assuming, these are %age on Gross rent , right ?

Pardon me if I am too naive to make following statement.

Wondering, if rentals bringing in  8 to 10,000 a year are worth the effort.

Why not buy a pre-construction and sell it for 8 to 10,000 $ in Florida or soeting else ?

Sounded like too much work and stress for 8 to 10K as Mike (PropertyManager) explained.

Only if I can find someone to partner with to do the work and I can be a sleeping partner  :)


Sunny
Title: Re:Ohio a good place to buy then rent out?
Post by: Jeff Pitcrew on October 03, 2005, 04:48:25 pm
I'm sorry, but it's illegal to invest in Ohio.
Title: Re:Ohio a good place to buy then rent out?
Post by: kdhastedt on October 03, 2005, 05:35:40 pm


LOL...stop Mike, you're killing me!  I think it's illegal to investg here, too!

Keith
Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on October 04, 2005, 06:34:43 am
Sunny,

In answer to your question:

1. I buy all my properties on a 20 year term so that I will get them paid off sooner.  Once they're paid off, then you're really making some money!  
2. Currently, I'm expecting interest rates of 7.25% for investment properties (no points).  
3. With gross rent of $25,000 and NOI of $6,000, that means that expenses are $6,000.  Expenses include taxes, insurance, maintenance allowance, utilities paid by the owner, management fee (if any), vacancy allowance, etc.  It does not include abnormal damage such as tenant destroying the house.
4. If you mean how many hours per week do I spend working on any given property - none.  Once the properties are rented, you don't have to do much unless there is a problem.  However, I do work many hours per week rehabbing new acquisitions, cleaning out vacated properties, etc.
5. No - see #3.
6. I don't have a job and thankfully haven't had one for about 15 years.  

You don't need to be very handy - you can learn.  Prior to becoming a landlord, I had never changed a toilet.  Now I can change one in my sleep - really - without even waking up!  Seriously, go to Lowes and get their home repair manual.  It contains everything you need to know to be a hands on landlord.

Commerical properties are a completely different animal.  They can be very profitable, BUT they can stay vacant FOREVER (or close enough to it to make you cry BIG tears).  

See you at the REIA meeting!

Mike
 

Title: Re:Ohio a good place to buy then rent out?
Post by: propertymanager on October 04, 2005, 06:37:26 am
CORRECTION,

In my last post, #3 should have said:

3. With gross rent of $25,000 and NOI of $19,000, that means that expenses are $6,000.  Expenses include taxes, insurance, maintenance allowance, utilities paid by the owner, management fee (if any), vacancy allowance, etc.  It does not include abnormal damage such as tenant destroying the house.

Sorry for the confusion.

Mike
Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 04, 2005, 08:55:23 am
Thanks a lot for the clarification Mike.


I unfortunately still have a job (Software Consultant) and an IT Company to run with investments in INDIA as well. I have to be very carefull on how much do I take on.

Would love to do some joint ventures though :)

See you today evening REIA


Sunny
Title: Re:Ohio a good place to buy then rent out?
Post by: cecsix on October 04, 2005, 11:06:21 am
i think metro columbus is a great area, especially for a beginner like myself.  you aren't going to make a boatload on appreciation, but you can buy good cash flow properties that are pretty easy to rent.  

i've thought about investing out of state, but it doesn't seem very realistic.  you have to have great trust and faith in somebody in the local market to partner with IMO.  

Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 04, 2005, 01:25:46 pm
Cash FLow sounds good to me. As long as I do not get called to fix an overflowing toilet :)

Sunny
Title: Re:Ohio a good place to buy then rent out?
Post by: Jeff Pitcrew on October 04, 2005, 02:23:41 pm
Better build a management fee into your price then <g>
Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 04, 2005, 02:52:19 pm
You are right Mike.

May be I should partner with someone for foreclosures or something.

Title: Re:Ohio a good place to buy then rent out?
Post by: MarkB on October 04, 2005, 04:01:28 pm
Carlosgut,

Ive been a Real Estate Investor In the Cleveland and Ohio area for over 20 years. let me know what type of properties you're interseted in and I will let you know the better areas to purchase property and give you some names of local realtors who can help

Mark
Title: Re:Ohio a good place to buy then rent out?
Post by: Bffw on October 04, 2005, 08:57:34 pm
I am in a partnership with another out of state couple.
There are making a 6% return on their investment with postive cash flow and equity build up of about 10-15 % a year.
He is a Doc and I do all the maintance and managment myself.
I am a contractor by trade.
Kansas City has plenty of deals.
Depends if you are a tire kicker or a doer.
Title: Re:Ohio a good place to buy then rent out?
Post by: [email protected] on October 05, 2005, 08:24:52 am
Bffw,

DO you any money of our own also in these properties ?


Sunny