What's a good cash on cash return for baltimore turnkey rentals?

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Ozzy SirimsiBusiness Member
Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
6y

If you are considering turnkey properties than you are settling with somebody else work, so if you get % 9 range you are lucky or you are in a bad neighborhood.

Recently, somebody else posted here, almost buying a house in a bad neighborhood with a ridiculous price.

Just be careful, and ask before you buy the house.

Reading these posts, I am going to start doing a turnkey business soon :D))

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  • Chris Mcdonald
    Real Estate Agent · Arbutus, MD · Member since 2019 · 127 posts · 59 votes
    6y

    @Jacob Niebloom

    $500+ or not worth the risk

    1Reply
  • Jacob Niebloom
    OP
    Member since 2020 · 5 posts · 2 votes
    6y

    @Chris Mcdonald I thought it was supposed to be a percentage, what does it mean to be 500$? In relation to what?

    0Reply
  • Sam Lewis
    Real Estate Agent · Baltimore, MD · Member since 2018 · 283 posts · 228 votes
    6y

    I like to go by the % rule (gross rent compared to purchase price). So a 100K property that rents for $1,000 / mo would be 1%. 

    For Baltimore City in a C class or better neighborhood, I would pursue a turnkey deal if it met the 2% rule. 

    4Reply
  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    6y

    If you are considering turnkey properties than you are settling with somebody else work, so if you get % 9 range you are lucky or you are in a bad neighborhood.

    Recently, somebody else posted here, almost buying a house in a bad neighborhood with a ridiculous price.

    Just be careful, and ask before you buy the house.

    Reading these posts, I am going to start doing a turnkey business soon :D))

    4Reply
  • Jenni Ellis
    Property Manager · Member since 2018 · 174 posts · 185 votes
    6y

    Most investors look at the 1% rule. Rents to purchase price. Anything off from that usually doesn't make sense. 
    There are other factors that I like to look at, what type of financing? If I can get the owner to hold the entire note and I don't have to go through a bank and have the loan on my credit, I may be willing to go a little higher. 

    Or does the property have everything new, and the repairs will be minimal for years to come. 

    In my opinion, this is a general rule, but I do feel if you can negotiate other "more favorable" factors into the deal, then it may make sense.

    1Reply
  • Soren Ager
    Member since 2019 · 27 posts · 8 votes
    6y
    I agree with Sam on this one. You have to go with % rule. 

    Look at it this way.. a 100k hours that rents out at $1000 a month, is way better than a 250k house that rents out at $1400 a month. Well at least in my book.


    Originally posted by @Sam Lewis:

    I like to go by the % rule (gross rent compared to purchase price). So a 100K property that rents for $1,000 / mo would be 1%. 

    For Baltimore City in a C class or better neighborhood, I would pursue a turnkey deal if it met the 2% rule. 

    1Reply
  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    For turnkey properties without deferred maintenance I would not have high hopes for high CoC return. Forced or regular appreciation might be a different story depending upon location.

    Disclaimer - I know nothing about the Baltimore market. 

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    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    6y

    I feel like it'd be helpful to give you specific numbers to answer the question you're actually asking...

    In looking at turnkeys I'm either involved with or have been involved with in Baltimore, I'd break it down into two different classes of turnkeys: turnkeys in more C neighborhoods ($70k-100k typically) and turnkeys in nicer B neighborhoods ($140k-190k typically). Cash-on-cashes for those, and obviously this depends on the financing rates you get, might range between: Cs-- 18-25% and Bs-- 10-18%. Give or take.

    Nice thing about Baltimore is expenses are really low, so that helps the numbers a lot.

    2Reply
  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    6y

    I primarily use the BRRR method, so the end goal is to have little-to-no cash invested which means that Cash on Cash Return is not a really meaningful metric. That said, I would look for at least $400/month net cash flow or else its probably not a good deal.

    2Reply
  • Soren Ager
    Member since 2019 · 27 posts · 8 votes
    6y
    Hey Joe

    I never quite got the idea about the BRRR. 

    When you do this BRRR, you basically want to get cash out for the next house deal right? The thing that comes to my mind is.. so you might have more rentals in the end, but they cash flow way less as you refi the rental to get max cash out, and therefore you mortgage is higher now. Where I might have fewer rentals but they cash flow, the same as someone that twice as many.

    I also look on, the more rentals you have the more work you have, plus risk of bad renters/payers.

    Would you mind educating me on what, I am missing here.


    Originally posted by @Joe Norman:

    I primarily use the BRRR method, so the end goal is to have little-to-no cash invested which means that Cash on Cash Return is not a really meaningful metric. That said, I would look for at least $400/month net cash flow or else its probably not a good deal.

    0Reply
  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Soren Ager:
    Hey Joe

    I never quite got the idea about the BRRR. 

    When you do this BRRR, you basically want to get cash out for the next house deal right? The thing that comes to my mind is.. so you might have more rentals in the end, but they cash flow way less as you refi the rental to get max cash out, and therefore you mortgage is higher now. Where I might have fewer rentals but they cash flow, the same as someone that twice as many.

    I also look on, the more rentals you have the more work you have, plus risk of bad renters/payers.

    Would you mind educating me on what, I am missing here.

    You've pretty much got it down, refinancing reduces cashflow and also reduces cash invested. I like it because it gives me the opportunity to force equity making it more profitable (and easier) to sell when/if I need to. Even though cashflow is generally lower then buying turn-key, cash-on-cash return is generally higher.

    At the end of the day there is no "right" strategy, everyone is going to have their own individual goals and resources available.

    1Reply
  • Joe Bruck
    Brooklyn, NY · Member since 2016 · 61 posts · 13 votes
    6y
    Originally posted by @Joe Norman:

    I primarily use the BRRR method, so the end goal is to have little-to-no cash invested which means that Cash on Cash Return is not a really meaningful metric. That said, I would look for at least $400/month net cash flow or else its probably not a good deal.

    Joe you said it very well... many investors in Baltimore city will tell you they average $300-400/month after all the gimmicks....

    0Reply
  • Soren Ager
    Member since 2019 · 27 posts · 8 votes
    6y
    How much do you plan for maintenance monthly? Right now I am putting 300$ aside a month and its def. way to much.

    Originally posted by @Joe Bruck:
    Originally posted by @Joe Norman:

    I primarily use the BRRR method, so the end goal is to have little-to-no cash invested which means that Cash on Cash Return is not a really meaningful metric. That said, I would look for at least $400/month net cash flow or else its probably not a good deal.

    Joe you said it very well... many investors in Baltimore city will tell you they average $300-400/month after all the gimmicks....

    0Reply
  • Percy Matsunaga
    Flipper/Rehabber · Sacramento, CA · Member since 2016 · 282 posts · 85 votes
    6y

    @Sam Lewis

    What’s your thoughts on the “C” class areas in Baltimore? Which Zip codes OT city names comes to top of mind??

    0Reply
  • Percy Matsunaga
    Flipper/Rehabber · Sacramento, CA · Member since 2016 · 282 posts · 85 votes
    6y

    @Chris Mcdonald

    What are your thoughts on middle income cities in Baltimore? Which zip codes or names of area do you feel that fall in this category??

    0Reply
  • Sam Lewis
    Real Estate Agent · Baltimore, MD · Member since 2018 · 283 posts · 228 votes
    6y
    Originally posted by @Percy Matsunaga:

    @Sam Lewis

    What’s your thoughts on the “C” class areas in Baltimore? Which Zip codes OT city names comes to top of mind??

    That’s tough man it is very neighborhood specific I also focus on the county and Harford county  

    0Reply
  • Chris Mcdonald
    Real Estate Agent · Arbutus, MD · Member since 2019 · 127 posts · 59 votes
    6y

    @Percy Matsunaga

    I love them. Baltimore has potential for turnkey rentals that generate $2-500 a month or BRRR's

    0Reply
  • Percy Matsunaga
    Flipper/Rehabber · Sacramento, CA · Member since 2016 · 282 posts · 85 votes
    6y

    @Chris Mcdonald


    which cities in Baltimore do you prefer? Anyplace that in your opinion have a better value than the other? 

    0Reply
  • Chris Mcdonald
    Real Estate Agent · Arbutus, MD · Member since 2019 · 127 posts · 59 votes
    6y

    @Percy Matsunaga

    DM me

    0Reply
  • Samuel Mallery
    Member since 2020 · 16 posts · 5 votes
    5y

    @Ali Boone when you say expenses are really low, which expenses are you referring to? Capex, vacancy or other ones? Only asking since taxes are high

    0Reply
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