Columbus OH 40-unit turnaround: opinions needed

[Jonathan West]

Hello BiggerPockets community.  Thanks in advance for your time.

I’m looking for some expert advice as my wife and I navigate the turnaround of a 20-duplex (40 door) Class C Columbus neighborhood. We’ve been struggling with occupancy and the expense of getting units turned: we bought the property at 83% occupancy (7 vacants, none rent-ready) but now, five months later, we’re currently sitting at 72% occupancy (11 vacant or being evicted; 8 not rent-ready) with only four units turned and with tenants placed.  Note that we have a property management company managing this and are out-of-state investors.

Here’s where we need some outside advice. Your opinions on our experiences for the following would be super-helpful:

1. The units were badly abused by prior management, but the property management company is spending around $8k per door in getting units rent-ready. This roughly breaks down to $2k for painting, $2k for purchase of Allure flooring, $2k for install of Allure flooring, and $2k for everything else (fixing holes in walls, rehabbing bathrooms, etc).

2. Units are only getting rent-ready 1-2x per month. This feels slow to us, but we expect is a function of a) the growth trajectory of the property manager’s business; b) the materiality of the unit rehabs

3. Only four new tenants have been found in the five months we’ve owned the property. This has sped up, with two being placed in December, but the pre-December lull alarms us given how hot Columbus is

4. We’re at a crossroads. The (quite material) reserve fund we’d set aside to support this property’s turnaround is nearly exhausted. Do we slow down unit turns to let this self-fund or do we plow ahead and sink another $50k or $100k or $200k into our operating budget to turn units and risk leaving them vacant? (Note: the turned units are bringing in an extra $100/month in rent, which is +$12k in value at a 10-cap. The challenge, of course, is that the units need to be filled and the value is tied up in equity and not cash in our pockets).

To be clear, the property managers have done a fantastic job with the other aspects of property management: maintenance requests (and there have been a lot) have been responded to promptly, data is readily available, we’re able to jump on the phones often. But this is our first RE experience so we’d love the outside perspective on some of these more troubling aspects.