Looking for my first investment this year- thoughts on this Ohio property?

[Nikita Sharma]

Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

Thank you all in advance!

[Vadim F.]

Quote from @Nikita Sharma:

Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

Thank you all in advance!

 @Nikita Sharma the issue is that you are looking at a property provided to you by a turnkey provider. Also, it depends on what market you are looking into within Ohio and what you are looking to achieve. Is it cash flow or is it appreciation?