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Author Topic: Ohio a good place to buy then rent out?  (Read 16398 times)

Offline 4EEM

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Re:Ohio a good place to buy then rent out?
« Reply #15 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
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline rballard

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Re:Ohio a good place to buy then rent out?
« Reply #16 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.

Offline 4EEM

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Re:Ohio a good place to buy then rent out?
« Reply #17 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.

Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline [email protected]

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Re:Ohio a good place to buy then rent out?
« Reply #18 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 ???
Sunny
[email protected]
(317) 698 3554

Offline carlosguti

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Re:Ohio a good place to buy then rent out?
« Reply #19 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.

Offline Dell Investor

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Re:Ohio a good place to buy then rent out?
« Reply #20 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....


Offline propertymanager

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Re:Ohio a good place to buy then rent out?
« Reply #21 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



www.1MinuteToRentalPropertyRichs.com 
This No-Hype, No-Nonsense Book is a step by step course in making money and building wealth with rental properties!  Everything from buying properties at a discount to dealing with terrible tenants.  Now In Paperback!

Offline 4EEM

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Re:Ohio a good place to buy then rent out?
« Reply #22 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)
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline propertymanager

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Re:Ohio a good place to buy then rent out?
« Reply #23 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
www.1MinuteToRentalPropertyRichs.com 
This No-Hype, No-Nonsense Book is a step by step course in making money and building wealth with rental properties!  Everything from buying properties at a discount to dealing with terrible tenants.  Now In Paperback!

Offline 4EEM

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Re:Ohio a good place to buy then rent out?
« Reply #24 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.

 ;)
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline 4EEM

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Re:Ohio a good place to buy then rent out?
« Reply #25 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
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline rballard

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Re:Ohio a good place to buy then rent out?
« Reply #26 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.

Offline carlosguti

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Re:Ohio a good place to buy then rent out?
« Reply #27 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

Offline Dell Investor

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Re:Ohio a good place to buy then rent out?
« Reply #28 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.

Offline rballard

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Re:Ohio a good place to buy then rent out?
« Reply #29 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.

 




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