Please help me understand these listings and returns

[Haritha N.]

Hello All,

I am going through BP marketplace and came across some listings. I would like to post my analysis on these deals here for your feedback. I hope it is allowed on the forums. Mods, please feel free to remove the post if it is not allowed.

1) https://www.biggerpockets.com/real-estate-listings/rented-double-in-north-collingwood-oh-1180-month

• Built in 1922
• Gross Monthly Operating Income: $1086  ($1180 - $94 (8% vacancy ) )
• Monthly Operating expenses: $567 (PM 10%, Ins 50, Taxes 150, Repairs 5%, CAPEx 5%, Utilities 150)
• Annual NOI: $6,222
• Purchase Price: $69,900
• 25% Down Payment: $17,475 ; Loan: $52,425, Term: 30 yrs ; Rate: 4.25%
• Closing costs: $3000
• Initial Investment: $20,475
• Monthly cash flow(before taxes) : $261
• Annual cash flow (before taxes): $3126.97
• Cash on cash : 15.27%

2) https://www.biggerpockets.com/real-estate-listings/value-add-10-unit-building

• Built in 1899
• Gross Monthly Operating Income: $2880  ($3200 - $320 (10% vacancy ) )
• Monthly Operating expenses: $1615 (PM 10%, Ins 150, Taxes 745, Repairs 5%, CAPEx 10%, Utilities 0)
• Annual NOI: $15,180
• Purchase Price: $181,500
• 25% Down Payment: $45,375 ; Loan: $136,125, Term: 30 yrs ; Rate: 4.25%
• Closing costs: $5000
• Initial Investment: $50,375
• Monthly cash flow(before taxes) : 595
• Annual cash flow (before taxes): 7144.16
• Cash on cash : 14.18%

If I look at just the cash flow, these two listings look good. What about appreciation? Given they are already ~100 years old, isn't there a risk the properties don't appreciate much? Do investors look for a balance of cash flow and property appreciation when they buy? Or do they give weightage to cash flow and then get rid of such old properties after a few years?

If you buy the properties of this kind, what is your idea about the investment?

If you don't buy the properties of this kind, what is your idea behind such a decision?

Thanks

[Haritha N.]

@Trent Stone, Thank you for your insight into the analysis. I get what you are saying about doing the due diligence. I posted them to figure out what else to think about even if ROI seems good. I get the importance that has to be placed on the location, neighbourhood, growth/appreciation/stability/peace_of_mind along with the cash flow.

I remember reading conflicting information about the cash-on-cash that investors aim for - some mentioned they won't even consider if it is not in the teens or higher. From what I see, I don't see any SFH deal giving a double digit ROI if the SFH is in a B or A neighbourhood. Am I missing something (or) am I not searching for deals hard enough (or) investors who look for pure cash flow might take some risk thereby rewarding them with high returns sometimes?

I googled population growth stats for both the places - North Collinwood, Ohio and Alexandria, Indiana. I couldn't find good results that tell me the growth/decline story of North Collinwood readily. Do you happen to remember/refer the site(s) that have this information in the results?

@Michael King, Yes, I thought so too. I didn't include utility cost whereas the post mentioned "owner pays all utilities". There is also high property tax of $6k, but, some Cap credits of $2700, net tax shows as $3300 in the county tax records. Yes, key details are missing and it seems too good to be true otherwise.