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Updated over 8 years ago on . Most recent reply

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134
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Sean Dawson
  • Investor
  • Columbus, OH
48
Votes |
134
Posts

Benefits of a "better" location

Sean Dawson
  • Investor
  • Columbus, OH
Posted

We had been in contact with a real estate agent in Cleveland, Ohio about a 20 unit.  Haven't heard back from him so I am assuming it is in contract at this point.  

Question I have though is the broker and property manager sent me a pm after I asked a few questions.  The agent answered my initial questions with good answers but I had some more including what the PM thought of the numbers stated by the seller and the numbers I had laid out.  

Deal was a 20 units of 1 br/ 1 bath on the borders of Lakewood.  Nice area and nice buildings.  Using the sellers numbers but adjusting them for higher taxes due to higher selling price,  insurance, PM, and lawn/ snow service I calculated that the buildings would not cash flow the $100 per door that we wanted.  

I asked for his opinion and he came back with: " Its hard to show the benefits on a strong neighborhood vs. a weak one on a spreadsheet. To often I see investors choose to buy properties in lessor neighborhoods because they look better on paper. Whatever you choose to do, don't be that guy."

Good advice but doing my research, reading and listening to podcasts here I keep coming back to @Brandon Turners advice " know what you want the deal to flow and stick with it. " (Or something like that!)

The building, neighborhood and rents were nice, but not what we needed.  So after all this, what is the benefit of a better property? Should you lower your per door "take" to make the deal, or perhaps the spreadsheet is not accurate?  

Thanks!

Most Popular Reply

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246
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William E.
  • Investor
  • Pearland, TX
136
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246
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William E.
  • Investor
  • Pearland, TX
Replied

a simple answer. 

a better building/neighborhood can equal people that want a better quality of living and may take more pride in where they live. They're likely to renew their leases and pay on time.

some things to think about is vacancy and replacing tenants..

you get over $100 a door, 

  • but if the turnover is higher, then you're losing $500-$1000  (depending on 1 month rent) if you can't get an instant tenant when one leaves.
  • if a tenant doesn't pay and you have to evict.. up to $5000 to kick them out

there goes your profit margins.

check this podcast out http://www.biggerpockets.com/show8

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