Learn me: CHEAP Ohio Real Estate

I have a local friend here, he had a 4 small inner city grocery stores in the Latino neighborhoods last 15 years. He is a CPA by trade.  Did really well and sold them all during covid.

He then last 3 years buying 50-80k homes in Akron Ohio and the surroundings. He hired 8 people there, and they do all the management/repair etc.  Once he disposed of his business here, he now has 4 people in OH working for him, and he himself is there 2 weeknds a month.

Per his info, he gets $900-$1100 rent per month/per unit.  He has 93 homes he has purchased in the last 36 months. 

Question for OHIO people: 

1) What do think of investing in Ohio?
2) Are the numbers my friend showing reasonable?
3) My thought is, locally if I showed you a $1100 a month rental, you wouldn't even want to be close to it, live in it, much less invest in it granted the demographic. 
4) If you think it is a good idea, any particular areas you would recommend?

He recently aquired two commercial properties, and they are 64% occupied. He had recommended looking into that as well.

P.S. it doesn't have to be 50-80k, those are what he has.  Where I am, you are looking at 550-650K for a decent rental, and monthly rent is about $3600. Of course, the appreciation of the market over time, really helps.  We have some in NC/FL/TX, but looking to expand a bit elsewhere. We will also be disposing of a hotel in Missoula this year, which will free up some capital that I want to put in more passive investing.  

Before most of us on west coast, would go to Reno/Vegas/PHX to buy cheap real estate. However, one thing is, when the market is down, those places are hit quite hard. 

Appreciate any insight you can provide on locations, prices, thoughts on Ohio in general.....

In about 2006 I was working for Boost Mobile (HQ in Irvine, CA.). I was explaining to my CA coworker that $168k bought me a suburban Toledo (Perrysburg, OH) 3 bed 2 bath, 2 car condo that overlooked the 12 tee of a private Country Club. 

My California coworkers answer was that out his way, there just plain aren't 168k house, apts, garages or anything you can live in for that price. 

These listing photos are from when I sold it in 2011 and Zillow says it's now worth $211k which might be right. Zillow says it would rent for $1500 which also might be correct. 

https://www.zillow.com/homedetails/29311-Bates-Rd-Perrysburg-OH-43551/35674402_zpid/

Zillow is often batE36 M3 crazy, but it does offer some ballparks.  Zillow thinks the house I bought 7 years ago for $87k is now worth $198k.  I might believe $125k.  It is a pretty good resource for the stats, like millage, acreage, amenities, etc, but zillow is just a propogated amalgam of public info.  There is zero research done by zillow, they just pull public info from the county and put a picture beside it.

I'm not a real estate whiz.  I've only ever bought two houses, and one was cash and my agent handled the whole thing.

I live in an suburb/exurb of Cincinnati, and my 3 bedroom split level is worth about $225-250K, but I don't know what it would rent for.  I think my nephew pays about $850 a month nearby for a 1 bedroom apartment with a den.  Inside the city, you are unlikely to find any bargains, but go to some of the surrounding towns, and it is possible.     If you are looking for potential areas, Hamilton and Middletown have somewhat dense single family housing, and are an area where a lot of people can't afford a down payment on a mortgage, so end up renting.  There are other areas nearby, too, but the logistics of hiring the same people to do all the maintenance and management may not work as well.

As a general rule, property is a lot cheaper in Ohio than much of the rest of the country, but it should be noted that income is also lower than average, so there is a much lower limit to what people can afford.

Edit:  Inside and near the city limits, there are quite a few duplexes and quadplexes, and they used to be the big thing for small time investors, as they could buy a quadplex, live in one of the units, and have rent from the other three cover their expenses.  Not sure if that is much of a thing around here anymore, or if the real estate investment companies have bought most of them up.

Patrick lives in central OH.  Wae is somewhere near Eastside Tim, but on the KY side, right?

Yeah, I'm on the good side of the river in Kentucky.  My only datapoint to offer is that I did rent two different places in the Canton area just south of Akron about 20 years ago.  I remember it being fairly cheap and there being a LOT of duplexes in the area.  My first go around was a duplex which was nice enough and the second time I rented an entire cottage on one of the little lakes up there.  It was a lot nicer than the similarly-priced duplex that I rented in Lexington at the time.  But then, I think any area with a large college nearby is going to be a little bit inflated since there's a lot of off-campus living.

Oh, another weird datapoint...  A friend of mine recently bought a farm out south of Falmouth, KY and had a home dropped off on the land.  This is fairly rural, but really hilly and about an hour or so south of downtown Cincinnati.  Anyway, he's got a neighbor - in relative terms, of course - out there who owns several mobile homes and one or two stick-built houses.  One of them doesn't have running water.  Not like the pipes are broken - it just never had plumbing.  Apparently, he's able to rent those out for an astounding amount of money per month, especially given their condition.

So, the monthly rents where you live are approximately 0.6% of the purchase prices of homes. The monthly rents for your friend's properties in OH is about 1.4% of the purchase price. 
 

Yeah, that's twice the gross return. But he has to manage 93 properties, and you'd only have to manage 10 (same overall investment)

The devil will be in the details. Maintenance costs, taxes, etc. 
 

I'll bet you get a helluva lot better house for $600K then he gets for $70K. 
 

Plus, he's gonna have lower income tenants (who are typically harder to manage). 
 

Interesting thought exercise...

In reply to mr2s2000elise :

My guess is the $80k houses need $20k of low grade remodeling/updating making them $100k homes. He then charges $1k. 

Is h accepting Section 8, govt assistance renters.?

Also, any thoughts on how long you might be holding on to these properties?  Ohio is not exactly a pleasant place to live compared to So Cal, but it (and Michigan and Wisconsin) land on a lot of lists of being able to weather climate change better than a lot of other states.  If you want to hold onto these places for 20+ years, they might offer a pretty good return when it is time to sell.

An old friend of mine used to be in the investment housing game around here, both fix and flips, and a few rental properties.  He ended up transitioning to insurance board ups and rehab work for other investors as it was more profitable, and then his reputation got good enough now he tends to stick to middle-to-higher end remodeling jobs.  I'm not sure what his opinion would be on getting into it now.

Paging Mr. Culberson, Mr. Culberson to the courtesy phone please...

Every time I've done this analysis, no matter where it is, I always come to the conclusion that it either requires a lot of work on your part, OR enough capital to scale it immediately and hire people to do the work for you. Otherwise, there are better places to park my money. 

This is not saying that you cannot get wealthy doing this, and it is not saying that it is a bad investment strategy, and it very well could be a superb investment strategy... But it is either going to take a lot of work and time, or a lot of initial outlay of capital, for it to match other, more passive forms of investing. 

That is just my experience in this stuff. I don't have a ton of time to put in work, I don't have a ton of ability in terms of fixing E36 M3 around rental properties, and I don't have the capital to play with commercial buildings or large scale operations, at least not right now. 

mtn said:

Paging Mr. Culberson, Mr. Culberson to the courtesy phone please...

 

Every time I've done this analysis, no matter where it is, I always come to the conclusion that it either requires a lot of work on your part, OR enough capital to scale it immediately and hire people to do the work for you. Otherwise, there are better places to park my money. 

This is not saying that you cannot get wealthy doing this, and it is not saying that it is a bad investment strategy, and it very well could be a superb investment strategy... But it is either going to take a lot of work and time, or a lot of initial outlay of capital, for it to match other, more passive forms of investing. 

That is just my experience in this stuff. I don't have a ton of time to put in work, I don't have a ton of ability in terms of fixing E36 M3 around rental properties, and I don't have the capital to play with commercial buildings or large scale operations, at least not right now. 

 

 

I came to the same conclusion. Rather park my money in a Vanguard dividend ETF, get my 4.5% return with zero hassles. 

I also have serious misgivings about lower income rentals. Neighbor across the street rents his house out for $3200/mo. Current tenet chain smoked inside the house and put holes in the drywall. Tenet before that caught half the house on fire during a BBQ and vanished in the middle of the night. This is a $500k house in a decent neighborhood. I can't imagine tenet behaviour in a house that costs a fraction in Ohio...

You want cheap land? Just find where people don't want to live. Works every time!

Downside: You have to live there. 

In reply to Shadeux :

I always had this crazy notion of buying up those massive tracts of land outside Vegas.  You see signs that say something like 6 billion acres for 24 cents or something.  The secret is to just live long enough for a bedroom community to crop up and you're set.  

I was house hunting in suburban houses in 2021-22 in Cleveland and surrounding. There some money and investments being made.  I was also looking to setup an auto repair shop in one of those areas that are "rejuvenating".  One person owned a lot of the property in the area, they bought cheap did nothing, cash grabbed covid money then sold the property for a profit.  There is some cheap property that can be purchased and a mayor that is seeking some building add Covid money.  The negative of those cash grab is it increases rent and hurts those that are lower income. I work in University circle and Cleveland Clinic, University, ect... are basically demolishing all the houses and putting fancy high risers, there is some investment if you bought cheap, rented for a while, and waited for CC or University to purchase you out is another avenue for possible money. $900-$1100 sounds high to me but the housing market has pushed some of the rents up. Just like the stock market eventually there is going to be a downturn.

Shadeux said:

You want cheap land? Just find where people don't want to live. Works every time!

Downside: You have to live there. 

I would love to find a place in the desert somewhere in the middle of nowhere. Somewhere where I can walk the dogs at night and see all the stars in the sky and the mountains in the background. Someplace where I can hear myself think. As Steve McQueen once said, "I would rather wake up in the middle of nowhere than in any city on earth.

But Mrs. Snowdoggie wants to stay put.

So I am still in the crazy money-money suburbs where crazed "investors" chase me all over the crowded dog park trying to make offers for my house and invaders from California fill the freeways to Los Angeles levels both day and night. How do I get out of this nightmare? Maybe this is all just a bad dream and soon I will wake up to discover that Covid, the insanity in Washington and the crazy blow up in housing prices just never happened. I think I am living in a bad science fiction movie.

Would this be financed or cash? In my opinion, one of the largest advantages of real estate is easy leverage. That really juices returns. At least it did when mortgages weren't 7%. Current rates really hurt the numbers though.

Paying cash skips the current financing downsides and increases cash flow, but reduces rate of return, cash on cash, etc. If you're getting something in the ballpark of 5% return from a cash flowing rental across the country, you can get 5% from a CD currently with zero risk, no transaction costs, etc.

SV reX said:

So, the monthly rents where you live are approximately 0.6% of the purchase prices of homes. The monthly rents for your friend's properties in OH is about 1.4% of the purchase price. 
 

Yeah, that's twice the gross return. But he has to manage 93 properties, and you'd only have to manage 10 (same overall investment)

The devil will be in the details. Maintenance costs, taxes, etc. 
 

I'll bet you get a helluva lot better house for $600K then he gets for $70K. 
 

Plus, he's gonna have lower income tenants (who are typically harder to manage). 
 

Interesting thought exercise...

Me and you always talk about this stuff... so I know you know exactly what I am thinking. My main concern is the tenant demographics. Without being politically incorrect of course.... 

There is plenty of section 8 local to me, if I wanted to do that, which I certainly don't, as you mentioned for the right reasons.... 

My initial feeling when he told me 3 years ago, was a hard no. I have softened some looking at his spreadsheets etc and pouring over them for few hours with him last night.  Having said that, I prefer to hear from real people on the ground in OH, than my friend, who is only looking at ROI (which is fine for him), but I am trying to get a more hollistic understanding. 

Always appreciate your input.  P.S. we picked up a couple in your state, doing fantastic really, but of course cost of entry is much higher.  Also if you want a property closer to Savannah for sale, I am gonna get rid of it this summer... 

STM317 said:

Would this be financed or cash? In my opinion, one of the largest advantages of real estate is easy leverage. That really juices returns. At least it did when mortgages weren't 7%. Current rates really hurt the numbers though.

Paying cash skips the current financing downsides and increases cash flow, but reduces rate of return, cash on cash, etc. If you're getting something in the ballpark of 5% return from a cash flowing rental across the country, you can get 5% from a CD currently with zero risk, no transaction costs, etc.

Yeah 5% CD seems guaranteed left and right these days.  These would be all cash. I personally don't want to make this thread about Vanguard vs RE (have had vanguard IRA since I was 16 years old, and I keep the Bogle bible at my bedside) - that said this is diversication if nothing else. 

eastsideTim said:

I live in an suburb/exurb of Cincinnati, and my 3 bedroom split level is worth about $225-250K, but I don't know what it would rent for.  I think my nephew pays about $850 a month nearby for a 1 bedroom apartment with a den.  Inside the city, you are unlikely to find any bargains, but go to some of the surrounding towns, and it is possible.     If you are looking for potential areas, Hamilton and Middletown have somewhat dense single family housing, and are an area where a lot of people can't afford a down payment on a mortgage, so end up renting.  There are other areas nearby, too, but the logistics of hiring the same people to do all the maintenance and management may not work as well.

As a general rule, property is a lot cheaper in Ohio than much of the rest of the country, but it should be noted that income is also lower than average, so there is a much lower limit to what people can afford.

Edit:  Inside and near the city limits, there are quite a few duplexes and quadplexes, and they used to be the big thing for small time investors, as they could buy a quadplex, live in one of the units, and have rent from the other three cover their expenses.  Not sure if that is much of a thing around here anymore, or if the real estate investment companies have bought most of them up.

What are some parts you wouldn't go to for free? I would like to eliminate searches in the Redfin locator... 

John Welsh said:

In reply to mr2s2000elise :

My guess is the $80k houses need $20k of low grade remodeling/updating making them $100k homes. He then charges $1k. 

Is h accepting Section 8, govt assistance renters.?

100% correct. He is spending 17,300$ per property (per his spreadsheet). He isn't doing section 8. 

eastsideTim said:

Also, any thoughts on how long you might be holding on to these properties?  Ohio is not exactly a pleasant place to live compared to So Cal, but it (and Michigan and Wisconsin) land on a lot of lists of being able to weather climate change better than a lot of other states.  If you want to hold onto these places for 20+ years, they might offer a pretty good return when it is time to sell.

An old friend of mine used to be in the investment housing game around here, both fix and flips, and a few rental properties.  He ended up transitioning to insurance board ups and rehab work for other investors as it was more profitable, and then his reputation got good enough now he tends to stick to middle-to-higher end remodeling jobs.  I'm not sure what his opinion would be on getting into it now.

I am looking at a 15 year hold time. I would love to have your friends take on what he thinks.  

mtn said:

Paging Mr. Culberson, Mr. Culberson to the courtesy phone please...

 

Every time I've done this analysis, no matter where it is, I always come to the conclusion that it either requires a lot of work on your part, OR enough capital to scale it immediately and hire people to do the work for you. Otherwise, there are better places to park my money. 

This is not saying that you cannot get wealthy doing this, and it is not saying that it is a bad investment strategy, and it very well could be a superb investment strategy... But it is either going to take a lot of work and time, or a lot of initial outlay of capital, for it to match other, more passive forms of investing. 

That is just my experience in this stuff. I don't have a ton of time to put in work, I don't have a ton of ability in terms of fixing E36 M3 around rental properties, and I don't have the capital to play with commercial buildings or large scale operations, at least not right now. 

 

 

There are definitely many ways to do things. Couple of things are, we are looking to scale our AirbNb up a little and add more properties this year in CA.  We have two large 200 room and 112 room hotesl coming up for sale (GA/MT).  With the profit from that, I am diverting into a hotel purchase in MT next to Glacier, and the rest of the money I want to pump back into commercial/SFR. Usually I am pretty sure where I want to buy (Truckee and Mammoth for now was this year's airbnb plan), but I wanted to run the OH numbers to see if it is doing better in a 10-15 year hold. 

My friend has nothing to gain to convince me, thus it was an interesting data point in a spot I didnt see. My wife is from MI, and there is a reason we hadn't done much investing up there (many have already touched on why - demographic of renters, depressed economy etc). 

Few of my local investment group friends specializing on making money on the back of certain inner city demo. That hasn't been my mantra, and I never really want to get into it. 

But information is key, and we should all look at all available options (at least that what I keep telling myself).

Snowdoggie (Forum Supporter) said:

 

I would love to find a place in the desert somewhere in the middle of nowhere. Somewhere where I can walk the dogs at night and see all the stars in the sky and the mountains in the background. Someplace where I can hear myself think. As Steve McQueen once said, "I would rather wake up in the middle of nowhere than in any city on earth.

 

 

I have the perfect place for you. If you want 5 acres or 150 acres, I have exactly what you describe. When you are ready hit me up. Cheaper than most of the cars GRM people have in their driveway ;)

In reply to mr2s2000elise :

I'm always interested in learning more. 
 

PM me with some info