Would love advise on purchasing in 43612 Toledo

Question

Hi all,

im currently looking at a commerical unit along 43612 on lewis ave. Would love some insight about this location. Pros and cons. What to look for? Much much appreciated as im looking into the multifamily space!

Sean Mahoney · Answer

I live in Toledo and work for a property manager here, when investors ask me where in the city to look at my usual suggestions are:

4361243613parts of 43607parts of 43609as well as almost all of the city suburbs.

As far as commercial property on Lewis ave, I can tell you that this year Lewis ave has been torn up for road construction which has drastically cut back on traffic. Hopefully that will all be cleared up soon. Other than the construction that's been going on, the area isn't bad at all.

James Wise · Answer

Toledo is like mini Detroit. Crime is high. Risk is high. But prices are low and the price to rent ration is great. It's easy on the budget if you've got an appetite for this type of investing.

Engelo Rumora · Answer

Hey mate,

We use to stay away from anything East of Lewis (See image).

The likes of Vermaas, Walker and Asbury.

Nowadays, we are lucky if we can get a deal for a decent price in this specific pocket.

Times have changed and today I'd say all of 43612 is very solid with lot's of appreciation over the last 2-3 years.

The further North of Lewis is better than South (Closer to Sylvania Ave).

Commercial real estate as in office space, retail or medical office, etc... is tough renting and a "so so" investment IMO.

Multifamily works but don't get out of bed unless you are buying a 10 cap.

Just my opinion.

All the best

Michael Smythe · Answer

@Abe Rouz listen to @James Wise!

When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Brian Cauldwell · Answer

Hi @Abe Rouz!

I have a client that owns around 7-10 properties in the 43612 zip code. He does not invest in commercial properties currently. Typically all 2-4 unit residential.

Coming from a DSCR/private institutional lending perspective, Toledo as a market is tough due to property values. Most lenders will want to see a higher as-is value/purchase price for the property. For 1-4 unit residential, pretty much every lender will need a minimum property value of $100,000 to even do a loan, which is tough in Toledo where you can find a rent-ready duplex for $90,000. I work with one lender that goes down to $75,000 as-is value, which we use a lot for his properties.

For commercial properties, the minimum property value goes up. I know of one lender who will do a minimum loan amount of $100,000, but the rest are going to want to see properties of at least $250,000+ as-is value for the property to do a loan.

Jaydee Harding · Answer

Hey Abe!

Just like every other area in Toledo; and any city for that matter... it is not zip code by zipcode it is street by street. There are fantastic areas to invest all around 43612. However, you have to know your streets. For instance, Asbury St. down by Lewis Ave is a lot different than Jackman and Laskey and thats only about a half a mile apart. Pulling comps for multi-family and commercial units in this area can be challenging.

I noticed you are looking into commercial units. I'll give you some advice on multi-family units that are on the market. If they are on the MLS, likely they are not making any type of cash flow. If they were, they would not be for sale. That is not the case always, but likely is. Companies and owners like to make deals look good on paper to out of state investors and after they close they realize they are in for an operational mess because tenants were moved in without being screened properly or there are known material defects that were not disclosed.

My advice if you are not local is to visit the place you are going to invest in. A cheap plane ticket can save you thousands of dollars. If you are local or not local, hook up with a professional that knows the area like the back of their hand and understands how much repairs are going to cost, can identify if the building has been well maintained, etc. etc. It's important to build a solid team you can trust. Do not work with individuals that don't specialize in investment properties. You want to know your best interests are being represented always.

David Bonitati · Answer

Hi Abe,

Unless it comes with solid long terms tenants and positive cash flow, I would stay away from commercial property on Lewis Ave.  There are still some Multifamily deal to be had west of Lewis Ave. that make sense.

All the Best,

Dave

Dhanesh Shelat · Answer

Hi Abe, I have a couple of houses and small multifamily properties in 43612. It seems to be a solid +C/B- area. Happy to share more of my thoughts. Feel free to send me a DM!

Would love advise on purchasing in 43612 Toledo

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