All Forum Posts by: Peter Lohmann

Do not purchase 35k homes as investment properties in Columbus (from anyone). You will break-even or worse in the long run. We manage 261 units (about half is SF) in Columbus and I've been purchasing and managing property here for 7+ years. For details, see: 

http://www.biggerpockets.com/renewsblog/2015/01/20...

or

http://www.biggerpockets.com/renewsblog/2015/03/03...

-Peter

Good to have you here, Grant.

I'm sorry I missed this meetup, but plan to attend them in the future!

@Rob Fordham Here are the facts:

1) You should set up an LLC to operate your real estate business out of. It's very easy here in Ohio: http://www.sos.state.oh.us/sos/upload/business/forms/562.pdf You can also file online. The cost is $125.

2) If you are purchasing a property with conventional financing (what most people think of when they hear "mortgage"), the bank will not allow you to hold title in the name of the LLC, nor will they allow the LLC to sign for the debt. You will have to do both of those things personally. Poof! There go the liability benefits of an LLC everyone is cooing about above. Now what?

Options:

A) Pay cash, get title in your LLC

B) Transfer the property into the name of your LLC after closing. Risky. There's a chance the bank could call the loan if they find out and feel like it.

C) (Recommended) Purchase an umbrella insurance policy to protect you from the liability associated with the property. This is fairly cheap and easy.

Hope that helps.

Search out some of my previous posts about Columbus, I have gone into detail on the subject in the past.

I'm wondering, though, if the long-term expenses of these properties in Columbus will offset the initial cap rate that the properties allegedly promise to generate.

They will.

Security systems - not worth it. Last time I tried to use a security system, the system itself was stolen!

You're better off physically securing the property - secure and bar doors and windows, especially sliding glass doors. Make your property less attractive to a would-be thief.

1. Olde Towne East

2. Schumacher Place

3. Franklington

My question is if there are neighborhoods in Columbus where these sort of deals might exist.

There are plenty of neighborhoods where deals just like that do exist. However, your plan has a few flaws:

1) Refinancing the property at 60k doesn't really help you much. For one thing, it reduces your monthly cash flow. For another, you're at risk of going underwater should you ever need to sell. Retail buyers are very scarce.

2) Assuming you plan to buy and hold, properties available to purchase for 30k will require a lot more than 15k in rehab to be solid performers in the long run (more like 50k). That is to say, homes in that price range in Columbus are OLD. They were not built in the 60's, not the 70's - these homes were built 80 to 110 years ago. The maintenance and capex demands are unreal. Without significant up-front investment, you will be nickel-and-dimed to death. Things like sewer and water service lines, main stacks - lots of old stuff that breaks and destroys your numbers for the entire YEAR.

We manage hundreds of these homes and, and our clients are barely breaking even in many cases, due to higher tenant turnover in those neighborhoods, the age of the properties, and the low rents. There's only so much a good property manager can do.

My recommendation is to buy one $100,000 home instead of 3-4 lower-priced homes. Your long-term performance will be higher.

I would like to purchase properties in the $20,000 to $30,000 range.

I strongly recommend against this. There's a reason veteran (5+ years) investors are not purchasing that asset class, and it's not because they're afraid of hard work.