All Forum Posts by: Domenic Passarella

Thanks Bob, that’s how I feel too, but it helps to hear it from someone else.

Hey, I know it’s not really answering your question directly, but I’ll give you my take.  I’m also in the middle of my first fix and flip in Cleveland (remotely, I live in Rhode Island).  Since it is remote, it is the first time I’ve ever used a GC. Before this, I’ve done six fix and rents in Providence acting as my own GC.

I can’t imagine doing my project without a GC, unless I was paying a handyman or a real estate agent every time to go meet a vendor there.   I have also really really lucked out with this GC, he started on the project a day or two after the close, and has been working on it since. Having no contacts in the area, I relied on my agent, who is investor friendly, he gave me a couple of contacts that he trusted.  I called all of them, only one of them picked up when I called, which is very important to me.  His price was reasonable, and he said he had the capacity to do it, and he came recommended, which was all I really needed to pull the trigger.

Long story short, after this experience, I would probably only do it with a general contractor, but I think the key is finding the right general contractor.  If you have a good agent, they should be able to help you with that.  

Journey Toole from Keller Williams is my agent and Darryl from World Builders And Contractors is my contractor.

Good luck

Hello BiggerPockets Community,

I’m looking for advice on whether to sell or rent out an out of state investment property I am currently having renovated. 

Background

I own and self manage six multifamily properties in Providence, RI, acquired between 2008-2013 at great prices, with less than $50K in total debt remaining. These investments have yielded high returns because I bought them foreclosed and fixed them up myself.  While I really lucked out on these purchases, the yield on them left me a little bit spoiled. Even though I wanted to, I haven’t made any purchases since about 2013 because the returns just weren’t as good as what I was used to. In hindsight, not continuing to purchase turned out to be very narrow minded.

This year, after listening to some podcast episodes, and a presentation at a real estate meet up, I decided I had to reengage, and eventually pulled the trigger on the following deal.

Property Details:

• Location: 13537 Cedar Rd., University Heights, Ohio (Cleveland Metro)
• Neighborhood Rating: A-
• Purchase Price: $153K
• Repairs: $65K (completion expected by May 1)
• Expected Total Investment: Approx. $225K

Property Features:

• First floor: 2 bed/1 bath, potential rent $1,200
• Second & third floor: 4 bed/2 bath, potential rent $1,500
• Separate utilities and heating/central AC systems

Initially, I projected over an 8% cash-on-cash return. However, two oversights have affected my calculations: (Both dumb mistakes I can only blame myself for)

1. Higher-than-expected property taxes and municipal fees in University Heights compared to Cleveland proper.
2. Overly optimistic rental income estimates.

After adjusting for these factors, including property management costs and other expenses, the revised cash-on-cash return is about $12,000 annually, slightly over 5%. The property was bought and renovated with cash, so there are no financing costs—just the opportunity cost of the investment.

Comparatively, I'm currently earning 5% in a money market account and 10% from participating in hard money loans. The after-repair value (ARV) of the property is estimated at $260K, which could net a profit of $15-17K after selling expenses.

At the sale price of 260K, the property meets the one percent rule and features a brick exterior, new roof, 2 new bathrooms, and 1 new kitchen.  The existing kitchen and bathroom on the 1st floor looks in pretty good shape. While I don’t need the funds immediately, selling would allow reinvestment in hard money loans at 10% or a similar real estate deal.

My main concern is tenant turnover, potential repairs, and the costs associated with re-leasing making my return even less.  My current estimates carry $200/month for potential expenses, which is included in the calculation that says 5% cash on cash return.

 I’d love your perspectives on whether to sell or start renting out this property.  I'm really on the fence.

Also, if anyone knows of a resource that helps predict anticipated appreciation or anticipated rent growth, please share!

Thank you for your insights!

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