Cincinnati Numbers Too Good To Be True?

[Jordan Tannenbaum]

Hey there Team BP! After months of following along the BP threads and webinars, it's time to make things happen. Can't thank the community enough for helping me to this point. 

Been analyzing some multi-family homes in Cincinnati and running the numbers over and over and think I am overlooking some major components--the numbers seem too good to be true. Here is how one example is breaking down:

3 units @ $600/month = $1800 rental income

7% Vacancy Loss = ($126)

10% Property Management Fees = ($180)

Monthly Operating Expenses (including 10% Capex) = (~$600)

Purchase Price = $100,000

20% Down Payment = $20,000

Acquisition Costs = $5,000

Interest Rate = 4.5%

Monthly Mortgage Payment (Principal + Interest) = $405

Here's where the numbers have me thinking I'm off somewhere:

Total Monthly Cash Flow = $670

Cash on Cash Return = 32.18%

I'd like to think I stumbled upon a unicorn, but I'm not so naive to think I got this lucky so early on. I would greatly appreciate any thoughts and pointers on doing analyses like this so I don't miss any major costs. This isn't the only property I've found with these kinds of numbers, so I'm assuming I'm consistently missing a major factor.

Thanks in advance!

- Jordan

[Joseph Cornwell]

@Jordan Tannenbaum

The only thing I do not see specific listed other than what was mentioned is your utilities, some properties in Cincinnati the landlord pays for heat, electric, almost always the landlord pays for water/trash billed together. Water in Hamilton County is very high do to the sewer fees. So make sure your getting the actual on these numbers, not estimating. Also since this is a multi, you need to consider any lawn/landscaping/snow removal cost. Furthermore, just because the numbers look good on paper, it could mean very little if you are in a very rough neighborhood, which Cincinnati has many of. This could lead to a lot of unpaid rent, turnover cost, evictions, property damage, etc. Especially if you are an out of state investor, you need a very strong manager in place to manage the tougher areas. If you have any questions in the Cincinnati market, feel free to reach out, good luck!