Interesting article on the new market where boomers are acquiring rental property (single family houses) for the sole purpose of renting to the millennial generation and using the rents to finance their retirement.

 

http://www.bloomberg.com/news/articles/2016-08-04/landlord-nation-boomers-new-retirement-plan-is-millennials-paying-rent

Real estate can be really risky if you are highly leveraged or are being speculative. However, these retirees and near-retirees are probably finding that the rentals are fitting their risk/return profile at least as better if not much better than marketable securities/debts. The risk-free and low-risk rates have been so damn low for quite a long time now that the return is better. Even if the house burns the land will still be worth something.

Looking to become buy and rent 1 or 2 small properties in Columbus shortly - for the first time.  Any advice on if forming a single member LLC is the right way to go?

 

Looking to become buy and rent 1 or 2 small properties in Columbus shortly - for the first time.  Any advice on if forming a single member LLC is the right way to go?

 

 

Why do you want an LLC?  Have you consulted an accountant/CPA (preferably specializing in real estate) and real estate attorney?  What is the benefit - based on the condition and value of these homes?  Are you just trying to protect your personal assets?

First, always glad to see this thread get bumped.  I actually just read through my last exchange with Brutus from many months ago and it was almost a rewarding rereading it as it was having that discussion originally.  One of the things I really like about message boards as opposed to, say, Disqus comment threads on articles that can easily get lost in the Internether (even when they're productive and not just ranting at one another).

 

Second, on the LLC option, note that you're unlikely to be able to use it to protect your personal assets to any significant degree because a bank that sees a new and empty LLC as the purported buyer of investment property will almost always demand a personal guaranty from the owner as well.  There are also compliance costs that come with owning a company (separate tax return, renewals with the Ohio Secretary of State, separate bank account, for example).  However, it does open some new options as well, particularly the ability to onboard new members if you think you might want to bring in other partners later, or the ability to sell the entity itself as opposed to selling the real estate within it, depending on circumstances.

 

Apart from the legal side, some people might find it useful just for business discipline.  It forces you to keep the business records in one place and separate from your own personal finances.  (Of course, the flip side is that if you fail to maintain that discipline, there can be consequences ranging from mild to pretty severe.)  Done right, that makes it easier to step back and ask yourself (and answer to yourself) how the business is actually doing, because things won't be mixed with your personal accounts.

First, always glad to see this thread get bumped.  I actually just read through my last exchange with Brutus from many months ago and it was almost a rewarding rereading it as it was having that discussion originally.  One of the things I really like about message boards as opposed to, say, Disqus comment threads on articles that can easily get lost in the Internether (even when they're productive and not just ranting at one another).

 

Second, on the LLC option, note that you're unlikely to be able to use it to protect your personal assets to any significant degree because a bank that sees a new and empty LLC as the purported buyer of investment property will almost always demand a personal guaranty from the owner as well.  There are also compliance costs that come with owning a company (separate tax return, renewals with the Ohio Secretary of State, separate bank account, for example).  However, it does open some new options as well, particularly the ability to onboard new members if you think you might want to bring in other partners later, or the ability to sell the entity itself as opposed to selling the real estate within it, depending on circumstances.

 

Apart from the legal side, some people might find it useful just for business discipline.  It forces you to keep the business records in one place and separate from your own personal finances.  (Of course, the flip side is that if you fail to maintain that discipline, there can be consequences ranging from mild to pretty severe.)  Done right, that makes it easier to step back and ask yourself (and answer to yourself) how the business is actually doing, because things won't be mixed with your personal accounts.

 

I will have to slightly disagree with you on the LLC part. I always recommend an LLC if you do it right. While it will not protect you from the bank, because of your personal guaranty, it does protect you from frivolous lawsuits by your tenants or their visitors to the property. Now, if you are going to do an LLC, you must set up another bank account and segregate those funds in that account. If you intermingle funds, it could be pierced by a good attorney. If it is an administrative burden to do this, then I would recommend obtaining an umbrella insurance policy on the rental property or even your personal residence to help mitigate the potential risk (although it is likely pretty small). 

 

The most important thing is to have a strong lease document. The LLC can help enhance that. None of this will prevent you from being sued. You can be sued for anything. However, what a strong document and LLC can do is throw up roadblocks to frustrate an attorney or adverse party into pursuing a claim against you. Even if the worst happens and someone tries to file a claim against you, the more layers and hurdles you create for them to jump through will scare off many attorney's who may otherwise take the case because there is no value in it for them.

http://www.wcpo.com/news/insider/cincinnatis-rental-market-soon-will-be-one-of-the-hottest-in-the-nation

 

I think this is more to do with that Cincinnati was late to the trend that has been going on in other cities in the region and are catching up with late rent increases.

A puff piece from Forbes re: some 28 year-old who appears to be attempting to bypass commercial realtors:

http://www.forbes.com/sites/samanthasharf/2016/11/07/how-a-28-year-old-plans-to-upend-the-81-trillion-global-real-estate-investment-market/#60b300898dac

 

The piece and video don't say that explicitly, but I can't imagine what else it might be he's trying to do.  I think it would be really easy to create a site with calculators that show you what the cap rate would be for a particular property at specific prices and loan terms, and then have 2-3 guys in each city who aren't licensed realtors who take prospective buyers to tour properties but who don't negotiate on their behalf.  I guess he's trying to get his company to also represent these properties.  So he can incentivize sellers into listing with him by taking only a 5% commission (or something like that) instead of 7% and easily advertise the property nationally.

 

But the dark side of this is it looks like he's trying to get naive investors into buying commercial properties or even shares of commercial properties.  That has scam written all over it. 

"Disruptive"

"Disruptive"

 

...but doesn't necessarily save money for the people who think they are saving money.  All these tech people (Musk, Theranos, Uber, etc.) always put some ideal eventuality out there and everyone thinks that's achieved without a cost to someone or everyone.  They also always present their finished product as being just 18 months away, at most. 

There may be something to this for him. The real estate market is very inefficient, that is part of the reason why people can do so well in this market is that the recognize the inefficiency and are able to exploit it. residential real estate is especially this way. You can price better efficiency into commercial because it trades on cap rates, etc. however, single family investment property is hard to gain the same efficiency of the stock market because each property no two houses are the same.

"Disruptive"

 

...but doesn't necessarily save money for the people who think they are saving money.  All these tech people (Musk, Theranos, Uber, etc.) always put some ideal eventuality out there and everyone thinks that's achieved without a cost to someone or everyone.  They also always present their finished product as being just 18 months away, at most.

 

Time will tell which ones are genuinely innovative and which ones are simply over-selling a promise. I don't think it's helpful to generalize about "all these tech people"... since some companies actually do develop better processes/tools/systems. If they don't, they fizzle out.

^ I remember being on a ski trip where I ran into a young Stanford graduate in the lobby of the lodge. He was telling me how he runs a $2 million tech company that he is going to sell to Zillow in 5 years for $100 million.

I asked him what he was doing, and he said he wanted to take the haggling out of real estate transactions and offer a fixed price because it is easier and more fair than negotiating. He said he got the idea for the project from a business professor who mentioned making the real estate market more efficient. I asked how his revenue model was going to work, and he said he was still trying to figure that out so I asked him how he came about a $2 million valuation for his company. He said that he and his partners were Stanford graduates and was told that that was the value of the collective brainpower of them as a group.

 

I chuckled because his idea was going to be a complete bomb and complete hubris on Stanford grads to think that if they think of an idea, no matter how impractical, it will be a million dollar idea because it came from a Stanford grad.

The Sharks wouldn't take that shit for sure.

I thought it was just a TV thing but I have been able to see first hand that the majority of Stanford grads are wide eyed know nothings with very little business acumen and common sense.

 

They think the can change the world and it matters little that the actually understand their market in doing so.

^ I remember being on a ski trip where I ran into a young Stanford graduate in the lobby of the lodge. He was telling me how he runs a $2 million tech company that he is going to sell to Zillow in 5 years for $100 million.

I asked him what he was doing, and he said he wanted to take the haggling out of real estate transactions and offer a fixed price because it is easier and more fair than negotiating. He said he got the idea for the project from a business professor who mentioned making the real estate market more efficient. I asked how his revenue model was going to work, and he said he was still trying to figure that out so I asked him how he came about a $2 million valuation for his company. He said that he and his partners were Stanford graduates and was told that that was the value of the collective brainpower of them as a group.

 

I chuckled because his idea was going to be a complete bomb and complete hubris on Stanford grads to think that if they think of an idea, no matter how impractical, it will be a million dollar idea because it came from a Stanford grad.

 

I kind of think that if there were some obvious work-around to buy homes (to essentially turn everything into a FSBO), that it would have happened by now, internet or no internet.  The web is 20 years old at this point, and I don't know that it or the cable shows have made the public any more astute in the purchase or listing of homes. 

 

It's probably made them more emotional.

 

With commercial, the emotion is supposed to be removed or at least minimized -- which should give more reliable financial results. Of course, that's not always true either.

^ I remember being on a ski trip where I ran into a young Stanford graduate in the lobby of the lodge. He was telling me how he runs a $2 million tech company that he is going to sell to Zillow in 5 years for $100 million.

I asked him what he was doing, and he said he wanted to take the haggling out of real estate transactions and offer a fixed price because it is easier and more fair than negotiating. He said he got the idea for the project from a business professor who mentioned making the real estate market more efficient. I asked how his revenue model was going to work, and he said he was still trying to figure that out so I asked him how he came about a $2 million valuation for his company. He said that he and his partners were Stanford graduates and was told that that was the value of the collective brainpower of them as a group.

 

I chuckled because his idea was going to be a complete bomb and complete hubris on Stanford grads to think that if they think of an idea, no matter how impractical, it will be a million dollar idea because it came from a Stanford grad.

 

I kind of think that if there were some obvious work-around to buy homes (to essentially turn everything into a FSBO), that it would have happened by now, internet or no internet.  The web is 20 years old at this point, and I don't know that it or the cable shows have made the public any more astute in the purchase or listing of homes. 

 

 

There are discount brokers there that charge a flat fee for their listings. THey will charge like $2500 to sell your house. It is nice but the traditional brokers often do not buy in and steer their clients away from those.

 

I do not think you can put the broker out of business because they provide a valuable service on both ends. Even on the commercial side, they are invaluable for us in finding deals. Most of the properties we buy are through pocket listings which never hit the market. We often sell that way too. Having good relationships with brokers is very helpful because they know the people who are thinking about selling and are able to put the deal together before it would turn into a bidding war.

^ I remember being on a ski trip where I ran into a young Stanford graduate in the lobby of the lodge. He was telling me how he runs a $2 million tech company that he is going to sell to Zillow in 5 years for $100 million.

I asked him what he was doing, and he said he wanted to take the haggling out of real estate transactions and offer a fixed price because it is easier and more fair than negotiating. He said he got the idea for the project from a business professor who mentioned making the real estate market more efficient. I asked how his revenue model was going to work, and he said he was still trying to figure that out so I asked him how he came about a $2 million valuation for his company. He said that he and his partners were Stanford graduates and was told that that was the value of the collective brainpower of them as a group.

 

I chuckled because his idea was going to be a complete bomb and complete hubris on Stanford grads to think that if they think of an idea, no matter how impractical, it will be a million dollar idea because it came from a Stanford grad.

 

I kind of think that if there were some obvious work-around to buy homes (to essentially turn everything into a FSBO), that it would have happened by now, internet or no internet.  The web is 20 years old at this point, and I don't know that it or the cable shows have made the public any more astute in the purchase or listing of homes. 

 

 

There are discount brokers there that charge a flat fee for their listings. THey will charge like $2500 to sell your house. It is nice but the traditional brokers often do not buy in and steer their clients away from those.

 

I do not think you can put the broker out of business because they provide a valuable service on both ends. Even on the commercial side, they are invaluable for us in finding deals. Most of the properties we buy are through pocket listings which never hit the market. We often sell that way too. Having good relationships with brokers is very helpful because they know the people who are thinking about selling and are able to put the deal together before it would turn into a bidding war.

 

If you hear of pocket listings in the Cleveland area, let me know!  Always looking....

^ I don't have many realtor relationships in the area. If you talk to a commercial broker and let him know what you are looking for, and he knows you are credible, then he will start sending stuff to you.

 

Start by talking to a commercial specialist from Howard Hanna or Keller Williams. Go on LoopNet and contact brokers about property they have listed and see what pocket listings they may have too.

It's probably made them more emotional.

 

People consider their house their "biggest investment" but are as emotional and irrational about it as anything else. 

 

A few years ago I watched a video by an uncool father-son duo who sold most of the properties the father had acquired over the years in Eugene, OR and Portland and relocated to...Kansas City.  There, in 2009-2010, with a few million dollars in hand, they feasted on $30,000 houses dotting KC's uncool 1960s-1970s suburbs.  They were getting 20-30% cap rates on everything they bought.  They were putting in over 50 low-ball offers per week and closing on 2-3 of these houses each week.  It was a feeding frenzy for about 18 months until the market started recovering. 

 

I thought it was just a TV thing but I have been able to see first hand that the majority of Stanford grads are wide eyed know nothings with very little business acumen and common sense.

They think the can change the world and it matters little that the actually understand their market in doing so.

 

 

The guys really making money over there are the ones who bought rental properties in Palo Alto and elsewhere near all that excitement back in the 80s and 90s.

 

My last year of college I had a revelation when I took an odd liking to my landlord, who was about 55 years old and owned about 25 houses around OU.  He was slightly obnoxious but kept all of his houses in good condition and had even built new houses in the backyards of older houses.  The precise moment of my revelation was when I was riding my bike on an errand and around 1pm I saw him in the yard of a house I didn't know he owned.  He was watching a crew put a new roof on that house, but with a beer in his hand.  At that moment I realized he was smarter than any of his tenants, their parents, or their professors! 

 

 

^ I had that revelation in college too. Of course I thought the ones who owed all the big complexes had all the money. In reality, it is the guys that owe the college property and trailer parks that really make the bank. I was speaking to a trailer park guy the other day and discussing his business model and that is where some great returns are made.

God yes on the trailer parks. The best is owning the trailers in the trailer park and renting them out, whether you own the trailer park as well or just own the trailers. Our farm is across from a trailer park and some of the trailers have been there since at least 1991 when we moved to the farm. These trailers, some from the '70s, have been fully depreciated for decades but people are still paying $350-$650 a month to live in them. Then there's lot rent which was $175 a month in 1992 in one of the worst trailer parks in the county for poverty. I'm sure some people are paying $1000 a month to live there.

 

The big whack though is when the septic and water systems need upgraded and the roads need repaved. I know someone had to sink $1-2 million dollars into that trailer park during the 2000s. I do know that a guy in his 20s bought it about 5 years ago.

^ Ideally, you can get a park on city sewer which makes it really easy. That is always the biggest risk for the trailer park though.

 

The other great thing if you do own the trailer is that they are easy to fix when you turn it over. Labor is much easier than apartments from what I hear.

Yes. There's trailer junkyards from which to source parts. Demo of old sections is really easy since the stock parts are so thin and cheap. It just pries right out. What you replace the factory materials with is invariably better with anything available from the local big box or specialty retailer, so the "structure" becomes stronger over time. Lets say dog pee rots the subfloor -- you can't buy inferior subfloor to what was stock.

Hurricane Harvey's strike overlapped the first of September, meaning the RENT IS DUE:

https://www.yahoo.com/news/landlords-demand-rent-flooded-homes-082310305.html

 

Here's where an over-leveraged property owner runs into trouble.  No doubt there are a few dozen characters in Houston who paid too much for a portfolio of rental properties and had very little cash flow and zero reserves.  The banks are licking their lips. 

Hurricane Harvey's strike overlapped the first of September, meaning the RENT IS DUE:

https://www.yahoo.com/news/landlords-demand-rent-flooded-homes-082310305.html

 

Here's where an over-leveraged property owner runs into trouble.  No doubt there are a few dozen characters in Houston who paid too much for a portfolio of rental properties and had very little cash flow and zero reserves.  The banks are licking their lips. 

 

Licking their lips to get what back, exactly?  Collection rights against companies with "very little cash flow and zero reserves," or foreclosure rights against utterly destroyed collateral?  The banks are crossing their fingers are praying that the owners didn't let insurance lapse on the affected properties while they weren't looking.  Both the owners and the banks may well be dependent on a lot of insurance recoveries in the near future.

he's licking his lips, he's ready to win

 

what a haunting night for love at first sting

A lot of landlords without any property damage will struggle to collect rent for September and possibly Oct-Nov if too many of their tenants have seen their workplaces destroyed. 

Hurricane Harvey's strike overlapped the first of September, meaning the RENT IS DUE:

https://www.yahoo.com/news/landlords-demand-rent-flooded-homes-082310305.html

 

Here's where an over-leveraged property owner runs into trouble.  No doubt there are a few dozen characters in Houston who paid too much for a portfolio of rental properties and had very little cash flow and zero reserves.  The banks are licking their lips. 

 

Licking their lips?? Banks loathe having to take property back. They are in the business of lending money. Foreclosures hurt them in numerous ways. THe last thing they want is to repossess the property.

 

Most landlord policies have a condition for lost rent that pays the landlord money for an uninhabitable unit. Also, if the tenant has renters insurance, the landlord may be able to claim here too. Most of the landlords will be Ok

Hello. Does anyone here have a recommendation for a good property management company in CLE?

270 properties in Hamilton County listed for $21 million:

https://www.sibcycline.com/Listing/CIN/1558033/6059-Kennedy-Ave-Kennedy-Hts-OH-45213

270 properties in Hamilton County listed for $21 million:

https://www.sibcycline.com/Listing/CIN/1558033/6059-Kennedy-Ave-Kennedy-Hts-OH-45213

 

I looked at the listing for three minutes and determined that portfolio seems waaaaay overpriced.

Jesus, is "families" that hard to figure out? If I hired a realtor to list my properties and found out they made a word possessive instead of plural multiple times I'd fire them. Simple grammar shouldn't be hard for someone listing a $21,000,000 portfolio.

 

Also, yeah, way overpriced. Every single property shown in pics looks to be in poor shape. And most seem to be houses that you can pick up for $25-$50k. Not worth the price.

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

Jesus, is "families" that hard to figure out? If I hired a realtor to list my properties and found out they made a word possessive instead of plural multiple times I'd fire them. Simple grammar shouldn't be hard for someone listing a $21,000,000 portfolio.

LOL.

edit

 

 

 

 

Edited March 30, 20205 yr by jmecklenborg

^ $240,000 per month..... if your gross income for one month is above the purchase price of a property or properties, buy it as soon as possible. 

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

 

Did you see the pictures with the listing? Most of the properties look uninhabitable. Waaaaaaaaaay overpriced. I'd be shocked if there were even 5 gems in the entire lot.

Do the math on collecting rent on 300~ units at $800/mo per unit...that's about $25 million per month.  That's a lot of work for an accountant. 

 

Check your math.

 

Per month: 300*$800= $240,000

Per year: $240,000*12=$2,880,000

 

Your point is totally valid that this would be an accounting nightmare, keeping track of each property.

My bad.  That was a spinal tap miscalculation thanks to my work cell phone calculator which I almost never use. 

 

 

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

 

Did you see the pictures with the listing? Most of the properties look uninhabitable. Waaaaaaaaaay overpriced. I'd be shocked if there were even 5 gems in the entire lot.

 

I don't understand why they never seem to picture the best properties on these sorts of listings.  But any buyer is going to look at the places and the numbers a lot more closely than the average buyer of a single family home. 

 

 

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

 

Did you see the pictures with the listing? Most of the properties look uninhabitable. Waaaaaaaaaay overpriced. I'd be shocked if there were even 5 gems in the entire lot.

 

When you are buying a portfolio like this it does not matter how pretty the places are, it only matters what their rental income is. These properties are being purchased for their ability to generate income and income alone. IF they are pretty great, but if not who cares. They do not even care if it appreciates in value because it is all about the income from these properties.

 

Yes, it is maybe priced a bit high. If they sell them individually, it will sell for around $21 million. If you sell the portfolio, as Jake pointed out, it will sell for a discount in likely the $14-$17 million range, depending on the buyer and where they are located. CA buyers will pay more

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

 

I agree...a CA buyer would be more likely to pay more.  I also agree with your value assessment, although my bottom is closer to 11 million.

 

Did you see the pictures with the listing? Most of the properties look uninhabitable. Waaaaaaaaaay overpriced. I'd be shocked if there were even 5 gems in the entire lot.

 

When you are buying a portfolio like this it does not matter how pretty the places are, it only matters what their rental income is. These properties are being purchased for their ability to generate income and income alone. IF they are pretty great, but if not who cares. They do not even care if it appreciates in value because it is all about the income from these properties.

 

Yes, it is maybe priced a bit high. If they sell them individually, it will sell for around $21 million. If you sell the portfolio, as Jake pointed out, it will sell for a discount in likely the $14-$17 million range, depending on the buyer and where they are located. CA buyers will pay more

 

 

I agree with you. CA buyer would pay the most. Also agree on value assessment, although my bottom is closer to 11 million.

 

 

So, what does the proposed Tax Bill hold for Rental Property owners?  Good news? Bad news? Time to change how you hold properties or your type of business entity?

This is an average of $77k per property. This is not too unreasonable for 240 single family houses and 30 multis.  Depending on the neighborhood, some houses may be 20-30k range but some are going to be well over $100k probably depending on location.

 

I agree...a CA buyer would be more likely to pay more.  I also agree with your value assessment, although my bottom is closer to 11 million.

 

Did you see the pictures with the listing? Most of the properties look uninhabitable. Waaaaaaaaaay overpriced. I'd be shocked if there were even 5 gems in the entire lot.

 

When you are buying a portfolio like this it does not matter how pretty the places are, it only matters what their rental income is. These properties are being purchased for their ability to generate income and income alone. IF they are pretty great, but if not who cares. They do not even care if it appreciates in value because it is all about the income from these properties.

 

Yes, it is maybe priced a bit high. If they sell them individually, it will sell for around $21 million. If you sell the portfolio, as Jake pointed out, it will sell for a discount in likely the $14-$17 million range, depending on the buyer and where they are located. CA buyers will pay more

 

 

I agree with you. CA buyer would pay the most. Also agree on value assessment, although my bottom is closer to 11 million.

 

 

 

You arrive at that number because are probably looking at it through the eyes of an Ohio resident (which is a compliment). I think just off the cuff without seeing the number I think 14-17 million taking a 9-12 CAP rate

 

Given a large portfolio, this is going to appeal to money on the coasts and is designed to appeal to a larger investor like that. In addition, there is a lot of 1031 money out there that needs to land somewhere and this gives it a great landing spot for those who need to find a spot for it. 1031 buyers are often apt and willing to overpay for a property to avoid the tax hit now in order to get tax savings on the back end or be able to get out of it at a later time without taking a loss. There are a number of complexities here for people playing that game.

So, what does the proposed Tax Bill hold for Rental Property owners?  Good news? Bad news? Time to change how you hold properties or your type of business entity?

 

http://www.marcusmillichap.com/research/researchreports/reports/2017/12/07/special-report-new-tax-plan

 

Not too much. The biggest difference is going to extending the amount of time the asset needs to be held to receive capital gain treatment from 1 year to 3 years (this is on investment property). Also the Senate Bill seems to extend the depreciation timeline from 27.5 years to 30 years for investment property.

 

Also, it indicates that with the increase in the standard deduction, it will lead to more renters and less buyers which is good for apartment owners. Health care real estate like nursing homes and medical office buildings is going to be hurt by the elimination of specialty health care bonds. Student housing could be slightly hurt too as less graduate students looking for housing.

When you are buying a portfolio like this it does not matter how pretty the places are, it only matters what their rental income is. These properties are being purchased for their ability to generate income and income alone. IF they are pretty great, but if not who cares. They do not even care if it appreciates in value because it is all about the income from these properties.

 

The annual returns tend to be higher on lower-income property but the management can be more difficult.  A guy on my street owns a 4-unit that he rents to people in some sort of government voucher program.  This same property is the source of most police calls and other drama on the block.  One guy who was living there had barbed wire tattooed across his forehead. 

 

He's probably making better returns than anyone else in the area since the building is in bad shape, complete with roof problems and small trees growing in the gutters.  It's the old Over-the-Rhine/West End business model. 

 

I'm deep in a decision process about whether or not to buy a 1 br condo in downtown Columbus as a rental property with my father doing property management for now.  Both properties I'm looking at have tax abatements - 1 through 2024 the other through 2021.  1 condo has a ~$350 HOA the other has a $90 HOA.  The one with higher HOA is significantly cheaper, but it looks like that HOA will end up making it costlier in the long run. 

 

I'm struggling on the decision because running the numbers gets me always to about breakeven with normal market prices for rent (e.g. ~$1500/mo for 1 br 700-900 sq ft).  If something happens where my dad can't do the PM work, it would be even tighter - but not too much.  Without a tenant for a month, money starts being lost. 

 

That said, I can absorb most costs if something happens.  I don't know though - all the numbers I'm running get me to about 5-8% yearly returns (after 7-10 years and with a small appreciation in home value) with everything going pretty smoothly.  That's not that great for all the work that'll go into it and having to sync 40-60K into it. 

 

Guess I'm just looking for thoughts on this.  Are people generally pretty happy with their rental properties?  Do you guys have a hard time getting tenants ever?

Most of not all condo associations have some restrictions on renting units, so you need to check ahead of time. 

 

A lot of guys who have made a lot of money with rentals have never bought anything that wasn't a deal.  So something that can get them much higher returns -- for sure north of 10%.  That means going to sheriff's auctions, buying from "motivated sellers", etc. 

 

The exception might be buying something adjacent to another property you own so as to keep your management fees down.

Anybody know what a reasonable cap rate is for multi-family in Over-the-Rhine (Cincinnati). For example, if a property has $100k in NOI, what would an appraised value be, using the standard formula: Value = NOI / cap rate?