Mls comps vs turnkey, prices of grapes vs wine?

Question

Hi bp!

I am trying to get a fair price for a couple turnkey sfr and there is a question about pricing of turnkey property being higher than mls.

In the c neighborhoods of dayton, oh, mls prices are generally below 50, owner occupants can't get financing, flip to sell is not really feasible, freshly rehabbed properties rent quickly and for good rents and good tenants. So, you look at the rental listings - lots of rehabbed properties. Mls listings - basically none.

Now, these places of mine have fresh rehab, fresh three year leases, and screened tenants who can easily afford the place. There is a lot of interest from investors, but I keep hearing the comps don't justify the.price. How do i arrive at a fair price when the mls has zero properties like that?

Thanks in advance for advice. Click on my name if you want more specifics. Gordon

Darrin Carey · Answer

@Gordon Starr There are no comps supporting that price, in that condition, in that location. That's the point. As the seller YOU are the one who should be supporting the price you are asking. Can you show a true comp with similar condition and location supporting your price?

I see the price in the market place set at $62,000. You mention 50k in one of your 11 responses to your own post trying to promote your property, and you mention 45k above. I do see two inquiries from other people. You also mention "buy it now" for 67k. How many prices do you have?

You also posted stating that "If people manicured the lawns more, it would be a B". Total BS. Manicured lawns has ZERO to do with differentiating between a B and C neighborhood. That's a solid C neighborhood, no matter how well the lawns are kept.You also said you have a 3 year lease. You are recording that lease per Ohio law, right?

30 Ashwood is being advertised for rent at $875, and 110 Redder at $835. You may have charged too LITTLE for rent, and then locked it in for 3 years.You are targeting a premium price and calling it a turnkey property, so you should have a premium product. Looking at the pics on Zillow I see the following:

• Paint and carpet look new, Carpet looks like lower grade. Not a big fan of carpet in rentals, it rarely survives one tenant. Living room hall and stairs should NOT be carpet. Bedrooms maybe.
• Looks like newer windows. 
• Deck should have been pressure washed.
• There's debris and an old truck topper in the back yard.
• Not a fan of the bathroom with the door opening to the kitchen, but that's a personal thing. 
• Laundry is not in the basement, that's good. Box and plumbing should have been inside the wall if at all possible. Painters tape was used, but it was left on the box. 
• I can't quite see, but it looks like the wrong PVC fitting coming from the Laundry sink to the horizontal.
• Original kitchen is ok in this area, but I would have replaced the hinges and pulls with a newer style. As turnkey, the kitchen should be new.
• The counter top corner seam is not done right. It'll allow moisture in and the counter top will buckle and deteriorate.
• Upstairs bath has the cheap surround. They rarely stay in good condition or looking good for long.
• Fans are old. For turnkey, these should be new
• Not a fan of the wood stove, I don't like giving tenants any ideas about burning things in the house.
• Basement looks good.
• Furnace and Water Heater appear newer.
• The electric meter is inside. At some point DP&L will require it to be outside. The panel looks new, I'm surprised it wasn't required with the permit.
• Glass block windows are good.
• Looks like there is central air.
• Someone may have to deal with sidewalk out front. concrete is missing in front of the tree
• Driveway needs a look, looks like the asphalt need repaired/replaced.
• Roof needs a closer look. It looks like a tarp is crumpled up on top. Some the shingles look like they are reaching end of life. The roof should have at least ten years left for a turnkey.
• Missing the front gutter on the upper roof.
• The back yard comes up to the bank parking lot, but it's a bank, so that's probably not a big deal.Based only on the photos, and no walk-through, if the items I mentioned above had been done, then I'd say it'd be worth 40-45k. As it it sits today, 30k(ish). I took a quick look at the other property, but stopped at the exterior. Old single pane windows, missing downspouts, older roof showing issues. Turnkey it's not.

Christina Carey · Answer

Hi Gordon,

There are actually a few different points to touch on here:

1. There are turnkey comps in the MLS in Dayton. Anyone who tells you there isn't simply doesn't realize that's what they're seeing.

2. In a rising market, I personally wouldn't want a 3-year lease - unless it allows for incremental increases in rents during the lease term. Also, in Ohio, any residential lease of 2 years or longer must be recorded with the county - an extra PITA factor that isn't necessary with a shorter lease term.

3. Turnkey also means there is ongoing property management in place. Not that a buyer couldn't hire their own - and some hire a different one than the one already in place with the turnkey seller. A lot of buyers in search of turnkey want everything together in a nice tidy package, so to speak, and they're typically seeking it from someone whose business model it is to provide turnkey ... it's the package that makes it worth the premium price, not just the condition of the property or the fact that it's rented. Although, just because a turnkey company is selling something, doesn't mean it's a superior product ... but that's a whole different topic.

If I were you, I would try contacting local property managers and see if any of their owner clients are looking for more properties. There may be a commission involved, but at least you'll have the right audience of buyers.

BTW, there are lots of discussions like this at our monthly networking meetups, as well as people looking for investment properties. Not all of them will be willing to pay premium prices, of course, but some will. There's also agents there whose clients will pay the higher prices. if you're local to Dayton, you should check one out if you've never been. The next one is April 9th.

If you still have no takers after you've tried to sell them via the above methods, then you definitely have a price problem, because there is no shortage of buyers for the type of properties you are describing.

Gordon Starr · Answer

As to the Carter Ave property,

I am uploading a map of the immediate area including comps and how I rated it. It backs right up against a B- area and has seen extensive demolition and rehab work recently. The SF houses range from 20$ per square foot for a run down overgrown foreclosure up to 50$ per square foot for a mid century mansion in decent shape. All of the mls listing were vacant and needed work compared to 30 Carter which will need nothing at closing. Based on my limited but very positive experience I am recommending the pm be Janice Kemmer

Buying a property off mls and turning it into a top producing rental takes a lot expense, risk, and work. The fresh finished rental is worth more to an investor than a vacant mls in the same way as wine is more valuable than grapes. The perfect comp is at 835 per month right around the next block. Its a nice brick in a slightly better location. What I am having trouble finding comps for is what does that actually sell for in freshly rented condition? What does a turnkey company charge for that place? North of 80k, I think. Not really sure..

The buy it now price of 67k is 50$ per sq. foot stops the bidding and comes with a brand new roof before closing.. The minimum bid is 45k and the property comes as is at that price. At these prices the return is estimated at 8-11.5% COC ROI.

Gordon Starr · Answer

This particular place on Kathleen was built by the leader of the carpenter's guild for his own family in 1950. His grandson gives the historical account that it has railroad rails in the foundation. There will be no further bidding as it is now gone at asking price pending to the tenants.

For those interested in this type of mid-century modern restoration, they rent and sell really well when done right. I actually did three of them on Kathleen and still have two left. The city is now going on their fifth demo on this short street. It has changed the landscape. So much work going on.. I just looked at the perimeter plans for the u-building restorations there. Pretty cool!

As to Darrin's concerns on this property, well the old windows work great and look ok. Folks - don't ever replace a good working antique when you are seeking an antique look. The downspouts are gone because I like my huge splash-rocks better. They are thick and more rigid and attractive than your scrawny, limp downspout which got crushed and thrown to the curb. Lol

Seriously, though... There are always going to be people to critique your property then say you are overpriced. You can't take it personally..

Gordon Starr · Answer

I would like to thank the Careys for their considered opinions. I clearly need to remove and replace some of my advertising material with more clarity as to what is being offered. Price can also be evaluated from the income stream the property produces. These two places are being offered at a sweet spot in the rental cycle. With this deal you should not have to do anything for a long time, just invest and "turn the key".

@Christina Carey wrote   "Not all of them will be willing to pay premium prices, of course, but some will."

My guess is that Darrin is one of those who will not  : )

I look forward to meeting you,

Gordon

Gordon Starr · Answer

@darrin carey, You saw I set the price on carter at 45k. Rents for 820 per, 70 per month taxes. What do you you say the price should be? can you show me a true comp with anything approaching those numbers? Gordon

Darrin Carey · Answer

Listen to the feedback you're getting.I know the neighborhood well, I currently have a rental right between both of your properties, I've done multiple deals in that neighborhood. I was there recently looking at two rentals for sale.I looked up your two properties for sale and reviewed the pics.

I think both properties are incredibly overpriced for the rent, property condition, and location.Also, Owner Occupants CAN get financing in that area. However, many (not all) of those who can get financing choose to buy elsewhere. For now, it's mostly a solid rental neighborhood, and the most the owners who live there have been there a very long time.

James Wise · Answer

Comps are what deciphers the value of the houses neighborhood. In my opinion a 3 years lease on a C class property ads zero value over a 12 month lease.

Mls comps vs turnkey, prices of grapes vs wine?

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