Ohio Cashflow and Oz Realty Review

[Kelly Farmer]

My experience:
Bought: March 2021, $64,900
Sold: April 2024, $48,500 - $5,000 (agent fees/closing fees/etc) = $43,500
Rental income (rents - expenses): $5,600
Average annual returns: 2.9% (approximate)
Net loss at sale: $15,800

Positives:
1. It was turnkey, but:
a. I had to ask questions to get explanations about frequent repairs. (For properties of this age, months requiring some kind of repair seemed as common as months where nothing needed to be done).
b. I had to make sure that the repairs/renovations promised at the time of purchase were actually completed. (It took almost a year, and frequent inquires, to make sure they were fully completed.)
c. I had to deal with my insurance company to get one month of rent reimbursed for the first tenant that ultimately had to be evicted.

2. Lonna
Lonna, the woman in charge of property management, is amazing. The one truly great thing I can say about Oz Realty is Lonna. She's kind, diligent, and professional. She responds to questions in emails line-by-line. I really appreciated her efforts and would hire her to work at my company in an instant.

Negatives:
1. My cap rates weren't near what was advertised. To be fair, Engelo did say cap rates would probably be a couple percentage points below what he advertised through his frequent marketing emails. The property I purchased had an advertised 9% cap rate. I would have been happy with 6-7% annually, but real cap rates were about 3%. I can imagine they'd average out at about 2.5-4.5% over time (5% in a rare great year), but not close to 6%. I asked Engelo about this after an initial period of muted returns:
Engelo: "You need to buy more properties to see higher annualized cap rates."
Me (thinking to myself): Even if I have 10 properties averaging 4%, that's still only going to add up to 4% on average.

2. I had high tenant turnover. (Oz Realty charges a one-month placement fee which does eat into returns over time. If the first tenant leaves within the first year of ownership, Oz Realty waives the one-month fee.)
My first tenant had to be evicted. He paid a month, skipped payment a month, paid for a month and a half (one month being the unpaid month), negotiated payment for upcoming months, lied about what he said he'd do, made a partial payment, promised to pay unpaid rent, then ultimately skipped out without paying for multiple months of rent. More than four months rent were lost between missed rent payments and legal fees to evict the tenant.

The next tenant was much better, but had frequent complaints regarding legitimate problems:
-bathroom sink hot water knob that didn't work
-rat urine smell coming from the vents
-water leakage from the toilet

(I understand that problems occur, particularly with properties of this age, but it was surprising/disappointing considering I paid Ohio Cashflow $64.9k for a property they bought for almost half the price, then, even after having done improvements, still required frequent repairs.)

3. Property appreciation
I bought the property for $64,900 and sold it for $48,5000.
The real estate agent throughout the sale process: "The markets have come down since you bought your property."
Me (thinking to myself): If that were the case, why do I keep getting Ohio Cashflow marketing emails for similar properties at higher prices than what I paid for?

4. Depreciation for tax purposes
The amount of annual depreciation OVERLY offset my net income on the property. Because the property's annual net income was so small, in some years the depreciation which offset net income was too much. Meaning, when it came time to actually sell the property, (for tax purposes) the cost basis of the property was reduced by the full depreciation amount, reducing the amount of capital loss (which could be used to offset more profitable investment).

5. The real estate agent that "helped" me sell the property wasn't helpful or easy to deal with. The most lucrative option Ohio Cashflow offered me was to use their real estate agent. I'll refrain from mentioning her name, but she was at times rude, unhelpful, forgetful, unresponsive, and incompetent. (I can understand that a real estate agent deals with a lot of clients, but she frequently forgot the simplest of details of what we spoke about, and often failed to follow through on the things she said she would do.)

6. I had to pay unpaid water bills when the tenant that needed to be evicted up and left. Because the property's water bills were not registered in the tenant's name, I had to pick up the bill. The bills were in the amount of about ONE AND A HALF MONTHS RENT.

7. I should have been smarter. Honestly speaking, I like people that speak frankly, so I was probably a sucker for Engelo's "if I swear a lot I will appear like a straight shooter" delivery. He used scarcity to get me to buy. It worked.
Engelo: "I have too many clients already and I'm actually thinking about not taking any more on." I can only guess this is untrue because of the regular "buy one of our properties" marketing emails I continued to receive, even after having purchased a property.

8. The overall property condition was worse than I imagined. Prior to selling, the buyer's inspection turned up significant mold damage to the property's foundation due to water leakage. This resulted in a substantial $2500 reduction in the sale price.

In summary:
The place I bought from Ohio Cashflow was an old, broken down home that required frequent repairs despite having "significant" improvements at the time of purchase. I was advertised 9% cap rates, told to expect 7%, but actually got around 3%. I couldn't realistically imagine getting 5% returns, so I sold. At the time of purchase I was not expecting property appreciation, but based on my purchase price, I can't imagine seeing any appreciation, even after 15-20 years.

[Engelo Rumora]

Quote from @Kelly Farmer:

My experience:
Bought: March 2021, $64,900
Sold: April 2024, $48,500 - $5,000 (agent fees/closing fees/etc) = $43,500
Rental income (rents - expenses): $5,600
Average annual returns: 2.9% (approximate)
Net loss at sale: $15,800

Positives:
1. It was turnkey, but:
a. I had to ask questions to get explanations about frequent repairs. (For properties of this age, months requiring some kind of repair seemed as common as months where nothing needed to be done).
b. I had to make sure that the repairs/renovations promised at the time of purchase were actually completed. (It took almost a year, and frequent inquires, to make sure they were fully completed.)
c. I had to deal with my insurance company to get one month of rent reimbursed for the first tenant that ultimately had to be evicted.

2. Lonna
Lonna, the woman in charge of property management, is amazing. The one truly great thing I can say about Oz Realty is Lonna. She's kind, diligent, and professional. She responds to questions in emails line-by-line. I really appreciated her efforts and would hire her to work at my company in an instant.

Negatives:
1. My cap rates weren't near what was advertised. To be fair, Engelo did say cap rates would probably be a couple percentage points below what he advertised through his frequent marketing emails. The property I purchased had an advertised 9% cap rate. I would have been happy with 6-7% annually, but real cap rates were about 3%. I can imagine they'd average out at about 2.5-4.5% over time (5% in a rare great year), but not close to 6%. I asked Engelo about this after an initial period of muted returns:
Engelo: "You need to buy more properties to see higher annualized cap rates."
Me (thinking to myself): Even if I have 10 properties averaging 4%, that's still only going to add up to 4% on average.

2. I had high tenant turnover. (Oz Realty charges a one-month placement fee which does eat into returns over time. If the first tenant leaves within the first year of ownership, Oz Realty waives the one-month fee.)
My first tenant had to be evicted. He paid a month, skipped payment a month, paid for a month and a half (one month being the unpaid month), negotiated payment for upcoming months, lied about what he said he'd do, made a partial payment, promised to pay unpaid rent, then ultimately skipped out without paying for multiple months of rent. More than four months rent were lost between missed rent payments and legal fees to evict the tenant.

The next tenant was much better, but had frequent complaints regarding legitimate problems:
-bathroom sink hot water knob that didn't work
-rat urine smell coming from the vents
-water leakage from the toilet

(I understand that problems occur, particularly with properties of this age, but it was surprising/disappointing considering I paid Ohio Cashflow $64.9k for a property they bought for almost half the price, then, even after having done improvements, still required frequent repairs.)

3. Property appreciation
I bought the property for $64,900 and sold it for $48,5000.
The real estate agent throughout the sale process: "The markets have come down since you bought your property."
Me (thinking to myself): If that were the case, why do I keep getting Ohio Cashflow marketing emails for similar properties at higher prices than what I paid for?

4. Depreciation for tax purposes
The amount of annual depreciation OVERLY offset my net income on the property. Because the property's annual net income was so small, in some years the depreciation which offset net income was too much. Meaning, when it came time to actually sell the property, (for tax purposes) the cost basis of the property was reduced by the full depreciation amount, reducing the amount of capital loss (which could be used to offset more profitable investment).

5. The real estate agent that "helped" me sell the property wasn't helpful or easy to deal with. The most lucrative option Ohio Cashflow offered me was to use their real estate agent. I'll refrain from mentioning her name, but she was at times rude, unhelpful, forgetful, unresponsive, and incompetent. (I can understand that a real estate agent deals with a lot of clients, but she frequently forgot the simplest of details of what we spoke about, and often failed to follow through on the things she said she would do.)

6. I had to pay unpaid water bills when the tenant that needed to be evicted up and left. Because the property's water bills were not registered in the tenant's name, I had to pick up the bill. The bills were in the amount of about ONE AND A HALF MONTHS RENT.

7. I should have been smarter. Honestly speaking, I like people that speak frankly, so I was probably a sucker for Engelo's "if I swear a lot I will appear like a straight shooter" delivery. He used scarcity to get me to buy. It worked.
Engelo: "I have too many clients already and I'm actually thinking about not taking any more on." I can only guess this is untrue because of the regular "buy one of our properties" marketing emails I continued to receive, even after having purchased a property.

8. The overall property condition was worse than I imagined. Prior to selling, the buyer's inspection turned up significant mold damage to the property's foundation due to water leakage. This resulted in a substantial $2500 reduction in the sale price.

In summary:
The place I bought from Ohio Cashflow was an old, broken down home that required frequent repairs despite having "significant" improvements at the time of purchase. I was advertised 9% cap rates, told to expect 7%, but actually got around 3%. I couldn't realistically imagine getting 5% returns, so I sold. At the time of purchase I was not expecting property appreciation, but based on my purchase price, I can't imagine seeing any appreciation, even after 15-20 years.

Thanks Kelly,

Did you post anywhere else that I might have missed so I can also reply on those platforms?

Yelp, Reddit, Google. Any others? 🧐

I'll also be sharing in the Ohio Cashflow thread - HERE

Thanks

Ohio Cashflow Reply 

Hi Kelly,

Thanks for taking the time to compose a detailed review of your experience.

I’d like to start off by apologizing for not meeting your expectations.

I would also like the opportunity to provide more context below for others to see and come to their own conclusions.

Wishing you much success with your future endeavors and again, our apologies for letting you down 🙏

5 years ago (Podio)

• Ruth. Let Kelly know to conduct further due diligence to see if the Ohio market and numbers are a good fit. Ask when to follow up again. Thanks

Reply to Negatives

1. 1) Engelo does not push sales. He never did and he never will. Marketing emails are “marketing emails” and composed/sent by our team. For 10+ years, Engelo has stressed in every phone call, email, podcast, blog, newsletter, etc… the importance of building a larger portfolio in a tertiary market like Toledo. Safety comes with numbers. Meaning, if you own a larger portfolio and 1 property is experiencing undesired returns. The better performance of the others will “prop” up the total performance of the entire portfolio. Also, Engelo has always advised investors that owning only 1 or 2 properties can be a “hit/miss” on a year by year basis. Engelo has also advised to not invest unless you are looking to build a larger portfolio. It’s not worth the hassle or risk. The investors that seem to be the most unsatisfied like yourself are the one’s that buy 1 or 2 properties and in Engelo’s/my opinion have unrealistic expectations.
2. 2) The property management team did a fantastic job based on your comments here. They did exactly what a good property management company needs to do. They kept you updated with the happenings and where proactive with trying to find the best possible solution. Lonna who you mentioned highly does a fantastic job and has been with us for 8+ years now.
3. 3) The reason why you kept getting “marketing emails” with higher priced properties is because the market has significantly increased in value since you purchased. Believe it or not, everyone and their dog are wanting to invest in Toledo and it’s even beyond my belief how much appreciation has occurred over the last 3 years. It’s a shame that you sold the property so cheap as I would have purchased it myself for that price.
4. 4) Not an accountant so can’t comment on this.
5. 5) Ohio Cashflow doesn’t have a “real estate agent” and we can simply refer one. Unfortunately, when someone leaves the "Wing” of Ohio Cashflow our hands get tied and things get messy when others (Realtors, property managers, etc.)… get involved. Most are incompetent and ignorant and “par time”. Plus, the sooner they sell the property (no matter the price), the sooner they earn the commission. Although this individual has performed very well in the past with investors looking to sell, things have gown downhill and we are no longer referring her. For this, I offer you my sincere apologies.
6. 6) Water bills in Toledo can’t be registered in the tenants name. This is one of the biggest downsides when investing in Toledo. It’s a shame the city has this policy.
7. 7) I’m blushing but Engelo doesn’t influence. Engelo doesn’t “sell”. Engelo turns down more business than he takes on. Engelo doesn’t give a $@%# if someone buys or not because Engelo doesn’t have a price. I NEVER say that “I have too many clients”. I say that “I don’t work with A$$holes”. So what you’re claiming is that Ohio Cashflow creates “false scarcity” because we send generic pre-scheduled marketing emails with properties sold months ago just to showcase examples of what we can offer? That doesn’t make any sense. And yes, we only sell a handful per month because we prefer staying small, boutique and niche. If we allowed financing, we could 10 fold our business overnight. For all reading, please Google “Engelo Rumora Scam” and try finding anything negative on Engelo’s “Sales” Tactics…
8. 8) After reviewing sales data, the buyers agent name is familiar and use to be local and is now based in another market either buying for himself or working with another investor. $2,500 for mold? If was the case, should have been much more expensive IMO. So this was just a manipulation to get the property for cheaper.

In summary: I’d like to apologize once again for letting you down. The property purchased was “old” (Like every property Ohio Cashflow sells) but was renovated. The property was tenanted. The property was sold for $64,900 in a B class area (43612) of Toledo. The team responded promptly and diligently. The team and myself did no run away and did our best the entire time. The property obviously cash-flowed although not as desired.

[Engelo Rumora]

For additional context on the above matter along with in depth "soap opera' back and forth, please click on this link - https://www.biggerpockets.com/forums/48/topics/1089655-warning-dont-use-ohio-cash-flow-unless-you-want-to-lose-thousands-of-dollars?highlight_post=6744974&page=4#p6744974

Thanks 🙏

[Kelly Farmer]

As a final comment and closure: I've spoken to Dominique and Engelo directly and we've both had a chance to air our grievances. We've come to a mutual understanding, and decided it was best for both parties to move forward.

i appreciate both of their efforts to communicate with me directly to find closure.