All Forum Posts by: Slocomb Reed

@Blaine Moore there have been some good responses to your question already. The only thing I'd add is that if you're investing out of of state and you don't have a local partner where you're looking to invest, it'll be more difficult to get commercial financing. Portfolio lenders tends to make underwriting decisions in real life sitting around a table as opposed to letting computers calculate borrowability for them, and most of them won't lend to non-local borrowers. This doesn't directly relate to your LLC question, except that an Arizona person with an Arizona company won't be considered as favorably as if there were an Ohio person involved in ownership.

One thing to keep in mind about rental real estate is that, so long as you're getting good rents from good tenants and you bought well, the rental income will keep your property afloat through a depreciating market. So long as you don't HAVE to sell you can ride the waves until the tide rises and you're back on track to refinance and cash out.

That said this is NOT the time to buy deals with high-interest short-term debt (hard money, etc.) unless you know it's a slam dunk. I'm about to refinance a single family I bought for $72,500 with a 100% LTV private money loan at 15% interest. The reasons I'm not worried are that it's rented for $1,200/mo and even during a pandemic the appraised value should be no lower than $120k (shooting for $135k). Had I bought it for $135k or even $110k with that loan I'd be in a very bad place right now, choosing between putting money into it to pay off the private money or paying 15% until the value went up.

@Todd Kalsey makes a lot of good points here. That being said, I haven't seen an open-market deal that would have a good ROI with the metrics you listed, particularly because of your expected repair costs and closing costs.

I know the market has shifted since you posted this in early March, but what's your ROI goal? I'd be happy to help you analyze deals but we need to know what your goals are before we can tell you whether or not you'll hit them.

@Willie Johnson I'd be happy to recommend, feel free to PM me and we'll go from there.

My oldest property here in Cincinnati has a plaque on it that says it was built in 1825. The oldest building in the neighborhood was built in 1814, so it's possible, but I don't have any evidence that it was built before the 1870s.

This has been mentioned a couple times:  in older parts of Cincy I look for masonry construction (stone/brick) because those structures are more solid even than the wood frame homes being built today. 

Another thing to consider is that in cities like mine (and Louisville I believe, likely most of this part of the country) there are neighborhoods that were built in the 19th century that have become incredibly popular (OTR I'm looking at you). That's not to say that all old neighborhoods are in the path of progress, but in the two neighborhoods where I own pre-1900 buildings, I'm willing to deal with higher cap ex costs because rents are going up and there's high demand to live in buildings like mine in spots like those.

@Jacob Seim owner-paid utilities are a major expense in Cincy because they're they're high in proportion to our relatively low rents.

Single family rental: customarily tenant pays all utilities, owner may pay water

Multifamily 2+ units: customarily owner pays water and trash (included in taxes for 2-4 units in city of Cincy), owner may also pay gas/heat if it's a central system like boiler/radiant. Not customary for owner to pay anything else, but not every situation is customary.

I do not suggest estimating water and gas costs yourself because there are way too many variables that are property-specific that you won't know about. Contact the utility providers (likely Greater Cincinnati Water Works and Duke Energy) and ask for the billing history kid the property.

Hope this helps! Utility cost is the only big expense I can think of that you aren't already considering.

@Firyal Kassim a RUBS is definitely the most cost effective way to get the tenants paying for heat. I have a 3 unit on a RUBS.

Another thing to consider is converting the units to electric baseboard heat. Assuming your boiler is in good shape it does not make sense to spend the money to do it now, but adding baseboard heaters will be way cheaper than a new boiler, plus they're easier and more cost effective to maintain and replace individually. Assuming your tenants pay for electricity, boom, they pay for heat, and they can have their apartment at whatever temperature they want.

Hey @Evan Polaski plase connect with @Mark Elder about the meetup if you haven't already. Thanks!

I'm a Cincinnati investor but I'll be looking towards the Dayton area as my portfolio scales. Most of the major commercial players (CBRE, Costar) lump the two cities into the same metro area and CBRE is reporting that it's a 7-cap market for larger multifamily. I was pretty surprised by their last report, that seems pretty low.

No way I'm paying a 6 cap for B class properties though unless they've been built in the last 5 years. Are you seeing older properties in B areas going for a 6 cap in Dayton?

@Scott Starrett I have high expectations of this part of Walnut Hills. Any talk of the future is speculation, but the hundreds of millions of dollars of development going in allround there will increase demand in the surrounding areas. If the market slows down or even takes a nosedive, it's important to remember that millennial housing trends will continue to lean heavily towards renting over ownership with very high demand for proximity to entertainment (getting to OTR, walkability, etc.) and your red box offers that proximity.

I'm almost done with a major rehab of a duplex close to there, I'd be happy to connect and discuss!