All Forum Posts by: Jim Truman

Hello BP,

I am looking for my second property (SFH buy and hold) and would like a reality check on my set asides when evaluating deals. I'm not asking how much cash I should have on hand in reserves - we have plenty of cash - but what my numbers should be when evaluating a rental vs another investment?

My requirement is Cash on Cash of 8%. If I can't hit this I'd rather not deal with the hassle of a rental property and will leave the money in the market. I read some posters on here who say as long as they have cash on hand to cover repairs than they don't worry about calculating set asides in the math. To me this is misleading and makes a rental investment look better than it actually is. 

I definitely do not ever want to be under water on an investment so I use:

5% vacancy

10% Maintenance

10% CapEX

10% PM.

I understand this is conservative but is this still reasonable? I ask because its seemingly impossible to find properties that CoC around 8% with 25% set asides. I'm not interested in rehabing property - updating is fine - but not an entire rehab.

I like Roofstock's website for evaluating deals and can filter for attractive cap rates and gross yield but went I get into their numbers I see they never use 10% maintenance and 10% capex. The attractive deals become unattractive as soon as I change the numbers. 

I want to stay conservative because real estate isn't worth it to me if it's not a better option than my current investments. But I also want to ensure I'm not using unrealistic criteria. I also understand mortgage pay down and appreciation are extra, significant, bonuses but I really don't want to bank on appreciation. Especially in my budget, these properties won't appreciate all that much. 

Stick to my guns and keep using my 25%?

Thanks

I'm interested in hearing from those who say they're finding great cashflow in Cleveland. I have one property there that cashflows ok. It's my first property so we didn't expect it to be phenomenal but it was a good entry into investing. Now, 1.5 years later, I'm struggling to find anything that cashflows. Looking in what I think are B cities (Bedford, Euclid, etc.) Even when I find a 1%'er, by the time you run the numbers with set asides for vacancies, maintenance, capex, PM, and taxes, it ends up being a poor deal. I think it's the property taxes that are killing the numbers...seem very high in the Cleveland area. 

Are you still finding good deals? (Budget <120k) 

Good info, thanks.

Thanks. From what I'm seeing, it's the condos that often times don't have an en-suite hookups for w/d. I know I shouldn't be looking at condo's but that's another discussion. We got lucky with our first condo and it has dishwasher and w/d. I'm wondering if I need to knock this off my requirements list. 

@Andrew Weiner, you said it's a big deal to have laundry in unit if it's a multi unit. Do you mean en-suite? I'm talking about buying an individual condominium/townhouse within a development that doesn't have it's own laundry in the condo. The development has shared laundry areas. Do you believe this is a turn off or not really an issue? 

@Katrina Razavi sounds like you've found a lack of w/d doesn't increase turnover. Any experience with lack of a dishwasher? 

Thanks @James Wise. You're obviously very familiar with the Cleveland market. By "access to laundry" I assume you mean either in the building or at least located rather close. In your experience would you pass on a nice unit if it didn't have en-suite laundry, but had laundry in the building? Or does this arrangement work fine for most tenants. 

thanks.

Thanks Ujwal,

Most of the SFHs have laundry but many condos don't. Those that don't tend to have laundry on site. So maybe not having en-suite laundry isn't that important?

Since most SFHs have a dishwasher it seems like not having one will steer a prospective tenant towards another home. But maybe I'm wrong about this as well. 

Good morning. I asked this in the Cleveland forum because I know the answer is somewhat market specific and that's where we're currently looking to invest. But I wanted to ask here as well to see what other investors think.

How important are things like dishwashers and in-unit washer/dryer for a Class C+ neighborhood, 2 bedroom rental unit? We're looking for a second investment property and being rather picky because we're out of state so turnover costs paid to the property manager can really kill a deal. We want a unit where the tenants will stay awhile and not get annoyed at having no dishwasher or no laundry. We also don't have a ton of money to invest so each property has to be a good one. 

Do you find these things really don't matter much when it comes to retaining tenants? What do you find are the most important features for keeping tenants? Overall square footage? 2 full baths vs 1? Kitchen storage space? Garage/carport? Fenced yards? 

A market like Cleveland (or similar) has 100's of properties so the more features I can add to my list to rule properties in or out will help. 

Thanks

Good morning. We are out of state investors in the search for another property in the Cleveland area. We aren't desperate so we're waiting for the right property. Our budget is <$120k. We're looking for units that could attract a quality tenant, and one that may stay for awhile, so we look for things like dishwashers, laundry, decent storage in the kitchen, etc. Basically, we don't want the tenant getting annoyed after living there for a while so they look elsewhere. Since we have to pay a property manager a significant amount of money every time the property turns over, too much turnover really kills the numbers. Our realtor, who is an investor himself, seems to think features like a dishwasher really don't matter. 

Are we being too picky? Do these things really not affect the ability to find a good tenant? For example, I just found a unit on the MLS where the numbers look attractive. There are a decent amount of kitchen cabinets for pots/pans but no pantry area for food storage. Is this a stupid reason to disqualify a unit? I know we'd get annoyed living there without storage space and probably look to move on after a year or so.

Do the types of tenants renting 2 bedroom units for $1,000 in the Cleveland suburbs really not care about dishwashers and laundry? (We personally love condos. Our first unit is a great condo in Bedford Heights. I'm looking for another condo but am open to SFH as well.)

If you were searching for a Condo or SFH, in B areas, less than $120k, what are some minimum features you'd look for? We have a limited budget for investments so we have to be rather picky to find the right ones.

Thanks.

Thanks everyone. You've pretty much confirmed my hesitation to jump on some of these properties I'm finding. Sounds like a thorough inspection by an extremely qualified and honest inspector is crucial to prevent picking up a lemon.