Toledo Ohio investment will it increase value

10 Replies

Hi BP friends! I have a potential investment in Toledo Ohio 43607 and I'm still deciding if it's a good buy. I'm from out of state. I've noticed that the properties are cheap on that zip code less than 10k. I'm wondering if the properties will go up in value in the future. It seems like the value don't increase much from 2012. The property just need minor cosmetic fix like paint, make the hardwood floors shine again, kitchen drawers missing and garage gutters fix. I'm wondering if it's a good potential investment considering the value is so low but potential cash flow will be good. ROI will be 39%. Pretty good but the only thing holding me back is the value. Will it be good buy for BRRR later if it's low? I appreciate your advice. How can I force the value up?

Anyone here who’s a contractor or know an honest contractor that can help me fix up the house? I also might need a property management  the seller said he has one but I just wanted to have a backup if this will push through.

Thank you for all your help. 

@Adonna Villanueva - Toledo is littered with the bones of out of state investors who looked at ROI and cheap prices and pulled the trigger without knowing what they were getting into.

Who is selling this property - are they licensed??? Do you have a professional inspection on the property??? Wholesalers of questionable ethics operate very aggressively in this zip code.

43607 is the definition of war zone...I'm on record stating that we have a zipcode hierarchy here in Toledo.

43612 and 43613 is a quality investment zone...you will end up in the bottom 25% of this area simply because home owners will pay more than we want to! Still, you can't go wrong on the value, just on the purchase price and condition.

43608 (43609, 43605 also which aren't my niche but perform for investors daily) I have made a real estate career out of buying in the TOP 25% OF THIS AREA. Sure you can snag crap at $10k but you suffer from marketability and low rent rates combined with challenged areas requiring intense management to succeed. The key is knowing what the good streets are and buying there...that's why I dominate the zip code and don't have any serious competition there.

43607 is 75% war zone and the majority of the area qualifies for me checking for spare magazines for my personal protection device before exiting my vehicle. 

That said I recently bought ONE property this year in 43607...I felt I'd found a profitable, appealing property and put my cash to work to see how I did. The major difference between us is this is my ~150th purchase and was added to a performing property of dozens. I also NEVER purchase my Toledo properties based on what I think I can sell for or what anyone else tells me the value is. I buy on steady income and cashflow and that's the reason I will profit in up markets and down markets here in Toledo.

Beware of 43607, it is not for first timers...I have turned down MANY MANY MANY properties offered to me for $1.00 in this area simply because they were unmarketable, thefted out, in the wrong location, etc. I have also turned down many investors seeking management because they can't keep crap properties in crap areas in crap condition tenanted profitably. There is a reason the city is demolishing houses daily in this zipcode. 

Toledo has profitable $40k-60k properties renting for $700-$800, these will do fine and perform for the long term...this is what I have built my reputation and fortune on and we manage ~500 properties for ~100 owners in this niche. Happy to discuss further if you are interested.

Andrew: thanks for your great insights.  You did not mention the Franklin Park area - 43615.  What is your opinion of that area as an investment zone? 

Before you buy any property anywhere you should:

Know your numbers forward and backward...purchase price, return and rent rate, cost to get it rented, who is managing and how much that costs, and what you do if you suddenly have to have cash and want to sell it.

Get a property inspection, I have a contract with a local company for a few hundred bucks they inspect any property my clients are interested in so we have an impartial view of the condition. (We just have to be on the same page that inspectors are paid to find problems and there is no such thing as a no-findings inspection...hairline cracks in a 50 yr old foundation or a basement that gets wet every Spring is not a crisis in the rental world)

Get an appraisal if financing is a concern...every property in Toledo suffers from appraisal discount in my opinion especially in cash-out refi situations, the less time between purchase and refi the lower that number comes back. I have seen many properties come back with a 60-80% valuation from purchase and advised that's much less the market value than the risk valuation the property receives in order to get a financier to invest along side you in real estate. 

Know who is doing the work in your portfolio...it is very unusual to be a capable hand-on rehabber, project manager of contractors, purchaser of materials, business manager and rental operator all at the same time. Every one of us has different skills and we have business relationships specifically to back fill the skills we are lacking (I keep an accountant because I'm a great property manager and real estate cowboy but not great at consistently balancing accounts). This is exacerbated when an owner is located out of town...make those relationships before you are holding a property.

Have a positive, pleasant attitude...successful vendors (myself especially) don't have to take on clients, we want to help people we enjoy interacting with and we want to hear from our team that our client is happy, successful and interacting reasonably and responsibly. There isn't enough money available for me to tolerate a client who is being nasty to the team. This is a very serious investment for you, we get that, work together with us to keep the asset well maintained and performing...see the warning on debt and leverage so you don't suffer undue fear and anxiety. 

Have a niche - what do you invest in that others don't, how do you differ in what you offer? If you don't have a reasonably firm strategy then you will suffer fear in being in the wrong niche and rapidly transition between investments...and transitions cost the most money in real estate! 

I advise being very careful with leverage...I have operated for a decade on a line of credit from my local bank and lived within that capability. The first four properties paid down the limit for the 5th, the 5 paid for the 6th, and rapidly I went from 1 purchase a year to 2 a year then 4 a year etc. The same annoyance at not being able to grow infinitely using infinite borrowed money translates to the lack of fear when bills come due or the market contracts. Keep cash on hand to go after deals and keep that cash to insulate you from fear when a bump in the road occurs.

Take it slow...nothing GOOD in real estate happens fast. Appreciation, rental income, equity, experience, relationships with vendors...it all takes time. You don't have to become independently wealthy over night...well, you won't :) You can definitely make bad decisions quickly if you aren't careful. 

I will edit this as more factors are identified, this is just my brain storm over coffee. :)

@Darius Ogloza - 43615 is very solid, I would put it a step above 43612 and on par with Washington Local school district rentals (this district crosses many zip codes).

I manage for owners in this zip code very well, I simply find that the prices are high enough that I personally don't buy there...maybe the next recession!

Please don't think I am saying the zip codes I quoted are the only or best, it's just where I know well. I have a family member who ended up buying $200k rental houses in a suburb with lake association access, those houses are super easy to manage and make money - they simply earn the same income I do with a $40k investment. 

Understood.  Thanks for sharing.  My wife is from Toledo (Northwood, to be exact) and we met at Bowling Green State in the 1980's.  We live in the SF Bay Area and have been investing in real estate since the late 1990's.  Our focus has mainly been on high growth markets in Marin, San Francisco and Yolo counties (UC Davis territory), SW Florida and most recently Las Vegas.  We get back to Toledo a few times a year as my mother-in-law still lives in Northwood and we are strongly considering adding add some "bonds" to our mostly "stock" portfolio.   Our one foray into strictly cash flow investing was in Rochester NY between 2004 and 2014.  The investments performed well, but we ran into management issues and cashed out.   

@@Andrew Fidler thank you for your feedback, I truly appreciate it. Thank you for sharing your insights. The property is 2 mi. from UT and I was thinking it will be a good rental property. ROI will be good as well if rented. I'll look into the other zip codes.

Thank you so much everyone for your feedback. 

I have had one client purchase in 43617 and he's been successful.  That being said, it was immediately East of UT's campus, which makes a big difference.  I wouldn't venture much past that at all, maybe to the extreme western part of the zip.  My general suggestion is very similar to Andrew's and Daniel's: 43613, 43623, 43615, 43612 (parts) are areas I would recommend focusing on.  

Also, when you talk about $10k properties, you're really not going to have success with the BRRRR strategy unless you wrap multiple properties into a commercial or portfolio loan. Most banks won't touch a loan of that size.

Best of luck in your endeavors! 

Originally posted by @Chad Boyers :

I have had one client purchase in 43617 and he's been successful.  That being said, it was immediately East of UT's campus, which makes a big difference.  I wouldn't venture much past that at all, maybe to the extreme western part of the zip.  My general suggestion is very similar to Andrew's and Daniel's: 43613, 43623, 43615, 43612 (parts) are areas I would recommend focusing on.  

Also, when you talk about $10k properties, you're really not going to have success with the BRRRR strategy unless you wrap multiple properties into a commercial or portfolio loan. Most banks won't touch a loan of that size.

Best of luck in your endeavors! 

Agreed with Chad,

The pocket just East of UT is very solid IMO.

Any appreciation in Toledo should be considered as the "cherry on top".

I just don't see enough demand or infrastructure being built that will drive up prices like other regions of the country.

Toledo tends to keep up with inflation.

With that being said, I don't think you can get a "better bang for your buck" anywhere else nationwide.

It truly is a hidden gem tertiary market lol

Happy investing 

Originally posted by @Andrew Fidler :

Before you buy any property anywhere you should:

Know your numbers forward and backward...purchase price, return and rent rate, cost to get it rented, who is managing and how much that costs, and what you do if you suddenly have to have cash and want to sell it.

Get a property inspection, I have a contract with a local company for a few hundred bucks they inspect any property my clients are interested in so we have an impartial view of the condition. (We just have to be on the same page that inspectors are paid to find problems and there is no such thing as a no-findings inspection...hairline cracks in a 50 yr old foundation or a basement that gets wet every Spring is not a crisis in the rental world)

Get an appraisal if financing is a concern...every property in Toledo suffers from appraisal discount in my opinion especially in cash-out refi situations, the less time between purchase and refi the lower that number comes back. I have seen many properties come back with a 60-80% valuation from purchase and advised that's much less the market value than the risk valuation the property receives in order to get a financier to invest along side you in real estate. 

Know who is doing the work in your portfolio...it is very unusual to be a capable hand-on rehabber, project manager of contractors, purchaser of materials, business manager and rental operator all at the same time. Every one of us has different skills and we have business relationships specifically to back fill the skills we are lacking (I keep an accountant because I'm a great property manager and real estate cowboy but not great at consistently balancing accounts). This is exacerbated when an owner is located out of town...make those relationships before you are holding a property.

Have a positive, pleasant attitude...successful vendors (myself especially) don't have to take on clients, we want to help people we enjoy interacting with and we want to hear from our team that our client is happy, successful and interacting reasonably and responsibly. There isn't enough money available for me to tolerate a client who is being nasty to the team. This is a very serious investment for you, we get that, work together with us to keep the asset well maintained and performing...see the warning on debt and leverage so you don't suffer undue fear and anxiety. 

Have a niche - what do you invest in that others don't, how do you differ in what you offer? If you don't have a reasonably firm strategy then you will suffer fear in being in the wrong niche and rapidly transition between investments...and transitions cost the most money in real estate! 

I advise being very careful with leverage...I have operated for a decade on a line of credit from my local bank and lived within that capability. The first four properties paid down the limit for the 5th, the 5 paid for the 6th, and rapidly I went from 1 purchase a year to 2 a year then 4 a year etc. The same annoyance at not being able to grow infinitely using infinite borrowed money translates to the lack of fear when bills come due or the market contracts. Keep cash on hand to go after deals and keep that cash to insulate you from fear when a bump in the road occurs.

Take it slow...nothing GOOD in real estate happens fast. Appreciation, rental income, equity, experience, relationships with vendors...it all takes time. You don't have to become independently wealthy over night...well, you won't :) You can definitely make bad decisions quickly if you aren't careful. 

I will edit this as more factors are identified, this is just my brain storm over coffee. :)

Hey mate,

"Get an appraisal if financing is a concern...every property in Toledo suffers from appraisal discount in my opinion especially in cash-out refi situations, the less time between purchase and refi the lower that number comes back. I have seen many properties come back with a 60-80% valuation from purchase and advised that's much less the market value than the risk valuation the property receives in order to get a financier to invest along side you in real estate." 

You hit the nail on the head.

We have had some appraisals come in less than what we had in the deal lol

Ridiculous...

Common practice by these "ding dong" appraisers is to use foreclosed comps.

It just doesn't make sense using a foreclosed crappy property as a comparable to a fully renovated/tenanted one.

It completely kills the value.

We always tell our investors looking to refinance that if it doesn't appraise for our asking price, don't blame us lol

Otherwise, we won't be able to sell to you.

Thanks 

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