Disney Cruise inspiring OOS investing in Dayton OH

52 Replies

So my wife and I went on a Disney Cruise last week. While on our trip we met a family from the Dayton OH area who, in addition to owning an HVAC business, owns 20 doors in that area. We are in the Charlotte NC area and this market is extremely tough right now for finding and acquiring cash flowing properties. I grew up in the midwest and have heard that there is a lot of opportunity for cash flow in the midwest, with OH having several hot spots. A quick scan of the MLS made it apparent that there are lots of small multis both residential and commercial that should meet the 1% rule and quite possibly as much as a 2% rule. I am looking for recommendations on tools that are beneficial for market research or reputable people in that area that can help me verify market rents, locate value add properties, and provide reliable property management. I would also appreciate recommendations on non-recourse lenders as we will be starting with retirement assets that are being transferred into a self-directed account soon.

@Jeshua Patrick It's a small world! I was actually on a Disney cruise last week as well. First & foremost, welcome to BiggerPockets! I'm a fellow investor in the Charlotte market and it definitely is tough right now - but would implore you to attend some local meetups and network as there are off-market wholesale deals that may meet your needs. I'm not knowledgeable regarding Midwest, but can tell you market is strong and growing in Charlotte which is promising for investors from an appreciation and rent increase standpoint. For self directed IRA, my knowledge of them is that you would not be able to purchase a home yourself with that $ but would need to find another investors deal to find and they would do the same for you. Best of luck & feel free to reach out and connect if you have any questions!

Thank you,

Colleen

@Colleen McCann really? Don’t tell me it was on the Fantasy. That would be crazy! I believe there are deals in the Charlotte area but using my retirement funds does come with some limitations. I can own rentals in my portfolio but have to use property management and can’t flip out of it. I can also loan money out of it but need to get a little more education on how to structure loans properly.

@Jeshua Patrick

1. I would recommend looking around Charlotte within 1-2 hour drive for cash flow before looking out of state or in Ohio

2. I would recommend not directly owning real estate in a self directed IRA. Lots of rules, expensive non-recourse debt and lots of ways things can go wrong. If you get a self directed ira, stick to note investing.

I don’t want to rain on your parade but you need to do a lot more research before you go buy a likely junky property in Dayton Ohio... as your first “deal”.

@Caleb Heimsoth just to clarify, I am not fond of the self-directed IRA for the reasons you mentioned. I am much more interested in a self-directed SoloK which is much less burdensome than a self-directed IRA with one catch. You have to have a pre-existing business entity that intends to make money prior to starting a self-directed SoloK. The non-recourse loan requirements still hold; however, tax avoidance/deferment is much easier. As for the Charlotte area, one of the reasons I am considering going out of state to some place like OH is that many of the "wholesalers" in the Charlotte area (1 hour radius) are getting greedy and trying to pawn off near retail priced properties (90% of claimed ARV) as deals while demanding cash buyers. In addition, Charlotte has very few small multi's available making compounding doors with fewer transactions more difficult. I will definitely take my time and focus on getting good boots on the ground before I pull the trigger OOS though.

@Jeshua Patrick if it’s still non-recourse then I still don’t recommend that for rentals. As far as OOS, I still don’t recommend that.

The Raleigh area is just as hot if not hotter than Charlotte, there are still deals here. Food for thought

@Jeshua Patrick in Dayton you can still buy a home for $10,000 but the problem is. Daytons economy is crap. There just aren't any jobs there. Half of my family still live there and if your looking to buy and hold it would be good. There are groups of people buying up blocks.

@Kevin Miller how is Columbus compared to Dayton? I was looking at population trends and it looks like Dayton had been in steep decline but was starting to level off and possibly grow again (maybe due to revitalization attempts) while Columbus looks to have a steady 1-1.5% growth rate.

@Jeshua Patrick i just read an article and downtown has around 1 billion dollars in multi use new construction approved. Deals are here but they have to been found. This summer we just went from 15th to 14th largest city in the nation and the job growth is on the incline as well. It's the total opposite of Dayton to be short.

@Jeshua Patrick  If you want to buy cheap houses and cash flow well buy in Dayton. Chances are when you go to sell in 30 years, the price of your home will be the same. If you want to have okay cash flow and have the chance to sell your property for double or trip in 30 years, buy in Columbus.

@Kevin Miller You might consider doing a little research before making a sweeping statement about an economy being "crap" based upon the misinformed statements of a few. Sales and rental markets are strong for the seller and the landlord alike, and were further strengthened by the housing shortage caused by the tornadoes, and I can assure you there is no shortage of jobs here in the Dayton area. Medical, biotech, defense, manufacturing, warehouse distribution, two universities, etc. The shortage of skilled labor here was already bordering on ridiculous, and was further worsened by the May tornadoes. And of course, there's plenty of entry level jobs in retail, food service, and hospitality. I find myself commiserating with other business owners frequently about not being able to find people who actually want to work - skilled or otherwise. If someone here says they can't find a job, it's not the economy - it's them. Whether it be incompetence, drugs, laziness/entitlement, or the idea that they are above doing a job because it's not what they want, or because it's not in the field of their underwater basket weaving degree. (I so wish someone would create a sarcasm font.)

Dayton now has a thriving economy and a great rental market. Personally, my wife and I have successfully done multiple flips, hold multiple rentals, many of our investor friends are doing the same.

As with any area, you can buy properties from A class to D class. Do be careful of the shysters out there who will advertise a D property as a C or even a B neighborhood. Some have a reputation of putting lipstick on the pig, then selling it as a premium product. Do your research! Some out of the area investors have been taken advantage of by those people and companies.

If you do your research, and work with competent and reputable people you can get a great ROI at a lower price point compared to most, if not all, of the coastal markets. The days of easily getting a decent house in an ok neighborhood for $10,000 are gone, but you can still get good cashflowing properties for $30-70k depending on the type of neighborhood you want to be in. If you want more appreciation, look at areas with houses for $80k and up.

@Jeshua Patrick You can buy properties off the MLS that appear to meet the 2% "rule". Those will typically be located in "D" neighborhoods, and your returns will almost inevitably be lower than projected. It's been a few years since I've been able to pickup a true 2% property in a C- or better area.

@Remington Lyman  Be careful of broad sweeping comments on entire communities. Dayton has the same variety of submarkets as any other city. You can buy for high cashflow/low appreciation or you can buy for lower cashflow/high appreciation. You just need enough knowledge and skill to know where you should be investing for the type of return you want. (Some of my houses have doubled and more in the past 10 years, not 30)

@Kevin Miller There is no shortage of jobs in Dayton, only a shortage of competent people to fill them. 

Ok I should have said good paying jobs.  I was born and raised in Dayton. It's trying to make a come back but it's way behind Detroit. When it gets more than one grocery store on the westside I would consider the city is on it's way back.

@Remington Lyman good to know. I would love to have both but I think cash flow is more important to me as a long term strategy. I would ideally like to find properties that I can use the BRRR strategy for growth with strong cash flow for my long term returns.

@Darrin Carey can you recommend any particular areas for B-C class properties or better yet any areas to stay away from. Also, are there any agents or property management companies I should start developing relationships with?

@Jeshua Patrick why are you so gung-ho on Dayton? Because you met a guy on a cruise who had some success there? There’s a 90 percent chance your experience would be very very different than someone who’s local

@Darrin Carey Price is determined by supply and demand. If Dayton has a decline in population, then the demand curve for the homes will decline. This will lower the equilibrium price of your property. Please see the below chart on the current population trends between the two cities and the graph explaining this economic principle. While historical data does not necessarily predict the future, I think we can assume Columbus will appreciate better than Dayton.

Dayton's Housing Market when population declines

As an occupant of Dayton, and not somebody with an agenda to sell, Dayton is an awesome place to invest. There are different areas to fit different investment strategies. Dayton has some of the largest employers in Ohio with the Air Force base and Kettering Health Network. There has been massive investments into downtown and whole neighborhoods are being flipped around. Furthermore, the Dayton area was ranked the number 2 area in the country for economic development projects.

https://www.daytondailynews.com/business/dayton-area-ranked-nation-for-economic-development-projects/CV1n4A1DvSZXY5tuzHdLqK/

Programs are in place to remove a lot of blighted property from neighborhoods to improve value. A big issue with Dayton is that some areas simply don't have house values to support fixing up the existing inventory. Once prices rise enough, I suspect there will be a flood of investment into the areas.

So not all doom and gloom as some would like you to believe.

@Caleb Heimsoth not "hung up" on Dayton in particular. As I said in my OP, I talked to someone from there who has 20 doors and had favorable things to say. My curiosity was peaked, the listings on the MLS seemed to further support what he said, and census data indicated that the population decline that occurred there is likely over with efforts underway to revitalize that market so I reached out on here to try to learn more. I know you are a "work your market" kind of guy and I would normally agree; however, the competition here is so fierce that the true deals are gone within hours and unless you have the marketing systems in place to generate your own leads a smaller fish like me will never see it.

Originally posted by @Jeshua Patrick :

@Caleb Heimsoth not "hung up" on Dayton in particular. As I said in my OP, I talked to someone from there who has 20 doors and had favorable things to say. My curiosity was peaked, the listings on the MLS seemed to further support what he said, and census data indicated that the population decline that occurred there is likely over with efforts underway to revitalize that market so I reached out on here to try to learn more. I know you are a "work your market" kind of guy and I would normally agree; however, the competition here is so fierce that the true deals are gone within hours and unless you have the marketing systems in place to generate your own leads a smaller fish like me will never see it.

The market I invest in is under 3 hours from you.  That market is my unique.  Lots of options in NC.  

@Caleb Heimsoth do you invest in Raleigh-Durham or outside of it? Maybe we should talk sometime. I am not abandoning NC just looking for better areas to work than my immediate market that will allow me a little more time to make good decisions while I gain experience. Near impossible to do that in my immediate area.

Originally posted by @Jeshua Patrick :

@Caleb Heimsoth do you invest in Raleigh-Durham or outside of it? Maybe we should talk sometime. I am not abandoning NC just looking for better areas to work than my immediate market that will allow me a little more time to make good decisions while I gain experience. Near impossible to do that in my immediate area.

One hour out side of Raleigh  

Originally posted by @Jeshua Patrick :

@Caleb Heimsoth not "hung up" on Dayton in particular. As I said in my OP, I talked to someone from there who has 20 doors and had favorable things to say. My curiosity was peaked, the listings on the MLS seemed to further support what he said, and census data indicated that the population decline that occurred there is likely over with efforts underway to revitalize that market so I reached out on here to try to learn more. I know you are a "work your market" kind of guy and I would normally agree; however, the competition here is so fierce that the true deals are gone within hours and unless you have the marketing systems in place to generate your own leads a smaller fish like me will never see it.

You will have this issue of deals getting picked up in hours in Dayton too. Lots of eyes on the market now.

 

@Jeshua Patrick There are a couple people in particular that I like to work with. Who I use does vary according to the market segment I'm in, and honestly, sometimes just how busy that person is at the moment. For B/C areas, I tend to like Huber Heights, Kettering, Belmont, and a few others. Market value on a typical 3/1 rental in a C area should range from 50-75k currently. A B area will run from 70-110k or so. Size, exact location, condition of course will matter. A fully rehabbed house will obviously be at the high end of that range or even more. The more work/updates they need, the lower the price obviously. You will find good properties outside those ranges also.

@Caleb Heimsoth Your persistent negativity toward someone who has a different investing strategy or investing interest than you do is uncalled for. Many real estate strategies can be successful, not just the ones you like.

@Remington Lyman It's a good thing the real world doesn't follow single variable statistics, it's far more complex than that. They also live in suburbs, not just the city itself. According to that simplistic graph and view, Dayton houses should probably be free. Here's a quick look at the real world for the entire Montgomery County where Dayton is located. Clearly the real world disagrees.

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