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Updated about 9 years ago,

User Stats

63
Posts
86
Votes
John Upperman
  • Investor
  • Clayton , NC
86
Votes |
63
Posts

Buy local or Turnkey

John Upperman
  • Investor
  • Clayton , NC
Posted

Okay BPers....I need some input.

First - a quick intro. I am new to REI and this will be my first investment. I will be making these purchases through my Solo 401k so the usual tax benefits don't apply and my up front cash requirements will be higher than a traditional, non-qualified purchase.

I live in the Raleigh, NC area and have spent the past two months analyzing more deals than I can remember. I have looked at numerous SFH opportunities locally and have yet to find anything that offers the ROI I require to support the cash investment (especially considering the fact that I have to discount any depreciation or tax benefits).

Here is my current situation:

Behind Door # 1 is a local Triplex with the following stats:

Purchase price $215K

Improvements $15K

Total rents (after improvements) $2475/mo

GRM 94.1

Cap Rate 7.5%

ROI w/o appreciation 11.84%

Cash on Cash 9.5%

Behind Door # 2 are 3 SFH located in Memphis, TN through a turnkey service:

Total Purchase price $249K

Improvements $0 (all improvements are part of the turkey service)

Total rents $2800

GRM 88.8

Cap Rate 8%

ROI w/o appreciation 13%

Cash on Cash 10.5%

I know all the math nerds are going to ask specifics about expense assumptions.  Being a math nerd myself, I have a detailed spread sheet that I am pretty confident captures all of the details, which is how I developed the high level results above.  

On the triplex I feel like the positives are the fact that it is local. I have driven the neighborhood and the person advising me on the purchase manages multiple MFH's in that area and has been investing locally for 20+ years. The cons for me are having all of my eggs in one basket (building) and the fact the MFH's don't appreciate as quickly as SFH.

For the Memphis properties I think the positives are a reputable company managing the rehabs and property mgmt (I have gotten references and confirmed).  The obvious downside is the fact that I have never set foot in Memphis and don't know that market.  

I would really appreciate some input/advice on this one.  Cash on Cash return is VERY important to me since there are retirement funds I need the money to GROW.  Otherwise I can just throw the money into a SPDR fund and forget about it.  I would especially like @Brandon Turnerto weigh in (although I'm pretty sure I know what his response will be). 

Thanks!

John

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