Guaranteed 21% Annual Appreciation? Columbus, Oh?...where else?

Multi-Family and Apartment Investing
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Guaranteed 21% Annual Appreciation? Columbus, Oh?...where else?

Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes

How is your MF market price appreciation?

I hear a lot of folks claiming their market is on "fire", but nobody ever supports that with data...our local MF market in Columbus, Ohio has appreciated at a year-over average of 21% in the 20 most productive zip codes for the last 5-years...the highest appreciating zip code grew at a rate of 64%...

How is your MF market price appreciation in other major metro areas?...Raleigh? Nashville? Indianapolis?....others?

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Nick B.
Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
5y

Past performance is not a guarantee of future results. 

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    I hear you @Bob S. I'm down with Cleveland...I send buyers there routinely looking for lower barriers to entry and off-the-charts ROI. It's an incredible market for putting cash to work.

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    Good points indeed @Jeff Piscioniere I was just having this conversation with a housing policy expert last night. 

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @James Maradits  I had to give you Cleveland guys a chance to peg someone from Columbus ;) I know these Columbus guys are always beating up on Cleveland. 

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  • Jim K.
    Rental Property Investor · Charlotte, NC · Member since 2017 · 271 posts · 259 votes
    5y
    Originally posted by @Brandon Sturgill:

    @Jim K. Truth be told I was really looking for you guys in similar markets to do some math and tell me how your market looks.

    1- download all closed MF transaction from the MLS for the last 5-years

    2- determine the top 20 zip codes by sales volume

    3- calculate the rate of change by zip code

    4- create power point

    5- share it on BP


     I would still recommend not using that language. Are you normalizing the data for $/unit and vintage? If not, comparing a 200 unit complex built and sold in 2020 to a 1900's duplex sold in 2018 is useless.

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Carlos Ptriawan good point here...you are correct...well, it wasn't actually the bottom, but we were buying duplexes for $35k 3-4 years ago and the same properties are selling at $120k today...full renovations in the same location are hitting the market above the $200k price-point...

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Jim K. 95% of MF transactions in our market are less than 5-units...we have 434,000 parcels in this county...24,000 MF structures...90% of the 24,000 are under 5-units...almost all are duplexes. This phenomenon holds true in Cleveland and Cincinnati as well....almost identical.

    We're not comparing commercial residential MF properties to duplexes...we're simply looking at the rate of change in sale price.

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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    5y
    Originally posted by @Account Closed:
    Originally posted by @Nick B.:

    Past performance is not a guarantee of future results. 

    "This forum regularly flirts with the edge of being r/wallstreetbets for REI."

    Wow! That is so dead on it's beyond words..... This should be the warning statement for newbies chugging kool-aid to make their first years million from their $500.00 investable capital. 

    So very depressingly true..... great quote. 

    2Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    5y

    Wait, @Brandon Sturgill your saying this vector of 20%+ annual appreciation, compounding annually, is just a set thing without doubt to keep scaling without end?

    If you can guarantee 20% annually, or even 15, why aren't you on with @James Wise the King of Ohio REI? Taking in billions in capital monthly?

    2Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y

    @Brandon Sturgill If what you say is so I would highly suggest you buy a few dozen properties for yourself to keep. 

    I read a number of your post now and prior that you make Columbus Ohio sounds so great I even thought about investing  there myself. If I was local I can assure you I would. I handful out of state properties, but I typically work harder and find  properties where I am physically located simply for the fact that I have the highest chance of working deals with sellers if I can meet them in person.

     I know that sounds old fashion, but it is what it is. The other reason why I don’t do a lot of out-of-state investing is if there is maintenance issues the property managers usually  don’t handle it in the same fashion I would.

    4Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Anish Tolia want this Bernie madoffs deal :)?

    1Reply
  • Tom Knox
    Investor · Vermilion, OH · Member since 2016 · 15 posts · 4 votes
    5y

    @Remington Lyman

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @James Hamling I don't think I can hang with James Wise, lol...he's next level...

    Maybe check the title of the post again...there are 3 question marks in the heading...I really have no intent to make unwarranted claims on a public forum...It's really an interesting find...we just plug in the data and run the formulas...the output is what it is. Will the appreciation continue...who knows...but you have to remember where Columbus was 5-7 years ago...some locations with 40-70% year-over appreciation are still affordable...very affordable compared to MSA's of the same size...

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Joe S. I am brother...15-hours a day.

    I agree with investing close to home...always makes more sense...and there are always deals...you just have to find them.

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  • James MaraditsPro Member
    Real Estate Broker · Cleveland, OH · Member since 2015 · 239 posts · 224 votes
    5y
    Originally posted by @Brandon Sturgill:

    @James Maradits  I had to give you Cleveland guys a chance to peg someone from Columbus ;) I know these Columbus guys are always beating up on Cleveland. 

     I appreciate the opportunity.  All in good fun!

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  • James MaraditsPro Member
    Real Estate Broker · Cleveland, OH · Member since 2015 · 239 posts · 224 votes
    5y

    I'll take the bait though...

     While it's fun to track, I don't know really think this type of data should hold much weight and I don't think buying in hopes of catching appreciation is the best strategy for most people.  I could probably pull a bunch of data from 2002-2007 and it would look great until 2008/2009 comes around the corner. As mentioned past performance isn't indicative of future results, and there can be any number of factors involved that the basic data simply doesn't show (a major new development, a major rezoning, etc.).  

    I just took a minute to play with some MLS data. I can pretty much punch in any zip code in the whole Cleveland area and the 5 year numbers look amazing (21%+ returns). I'm fairly certain you could pick a zip code in nearly any market and see substantial appreciation over the last 5 years in most markets.

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  • Brandon SturgillBusiness Member
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    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @James Maradits

    Send me that csv file ;)

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  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Nick B.

    Hilltop

    Franklinton

    South Linden

    North Linden

    Southern Orchards

    Hungarian Village

    Reeb Hosack

    Driving Park

    Vassor Village

    Whitehall

    Eastmoor

    Shepherd

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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    5y
    Originally posted by @Brandon Sturgill:

    @James Hamling I don't think I can hang with James Wise, lol...he's next level...

    Maybe check the title of the post again...there are 3 question marks in the heading...I really have no intent to make unwarranted claims on a public forum...It's really an interesting find...we just plug in the data and run the formulas...the output is what it is. Will the appreciation continue...who knows...but you have to remember where Columbus was 5-7 years ago...some locations with 40-70% year-over appreciation are still affordable...very affordable compared to MSA's of the same size...

    In the Twin Cities there are homes I see selling now for around $145k that not too many years ago I passed on for $15k, literal numbers. Those numbers today make sense and back when I passed on them at $15k it also made sense, it's the market that's made the difference, from total collapse flooded with properties to a significant shortage market with capital desperate to find a place to be deployed. 

    I am willing to bet there are a lot of markets out there that have similar stories, but these properties are at the glass ceiling, no room for additional appreciation until user base median incomes have significant incline as a tenant base can not support housing costs north of 50% gross household income, not sustainably, and that's the #1 factor holding prices down as demand and replacement costs would allow it to run another who knows how much, 30%-40%. 

    2Reply
  • Jacob Bohrer
    Rental Property Investor · Canton, OH · Member since 2020 · 58 posts · 22 votes
    5y

    @Brandon Sturgill Fake news

    1Reply
  • Brandon SturgillBusiness Member
    OP
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Jacob Bohrer ? Can you clarify your response, maybe. I'm happy to respond to an intelligible remark on the post.

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  • Mike B.
    Rental Property Investor · Madison, WI · Member since 2020 · 91 posts · 71 votes
    5y

    @James Hamling

    The second paragraph of your last post is interesting and something I think about quite a bit. I generally agree with your assessment, but do you think that with all of the capital floating around combined with all the hype surrounding real estate there's a possibility of continued price appreciation/cap rate compression from investors willing to pay more for the same NOI?

    1Reply
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    5y

    @Anish Tolia

    Remember on BP, Columbus sounds like it has the economy of SF, the location of London and the beauty of Paris all combined in one. On BP, Columbus is the Gold Standard of the Gold standard. In real life however it is very hard to find those facts! I meet with business people and investors all the time and Columbus never comes up in the discussion! Just saying.

    3Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Justin Thorpe:

    @Anish Tolia

    Remember on BP, Columbus sounds like it has the economy of SF, the location of London and the beauty of Paris all combined in one. On BP, Columbus is the Gold Standard of the Gold standard. In real life however it is very hard to find those facts! I meet with business people and investors all the time and Columbus never comes up in the discussion! Just saying.

    you are meeting with the wrong business people and investors. 

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  • Account Closed
    Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
    5y
    Originally posted by @Justin Thorpe:

    @Anish Tolia

    Remember on BP, Columbus sounds like it has the economy of SF, the location of London and the beauty of Paris all combined in one. On BP, Columbus is the Gold Standard of the Gold standard. In real life however it is very hard to find those facts! I meet with business people and investors all the time and Columbus never comes up in the discussion! Just saying.

    I think the root cause of all this investor mania over our price appreciation is partially that Columbus never had the same steel mill "rustbelt" beginnings as many other cities around here did.  Thus we never had the giant boom of building WW2 workforce housing to supply steelmills and factories, and then had all those neighborhoods bust out when all that closed. Likewise we were never a "market/trade" city that grew because of industries now automated (Memphis and cotton) or trade via rivers (Cincinnati).   Columbus started boring and small. Our nickname for a long time was "cowtown" because the only thing of note here was a giant cow farm south of town.

    Now, as the cities are growing naturally back towards their boom-peak populations, investors and homeowners have these poor neighborhoods just waiting for someone to invest in.. Someone elsewhere was joking about James Wise being king of Ohio landlords, but he's excelled in his niche of working in those sprawling areas of Cleveland that are poor and distressed, with their vicious tenants. We do have C-/D/F areas, but they are much smaller and do not support huge PM companies that probably have a line-item budget for firearms and bulletproof vests. We also don't really have many (any?) turnkey providers like Memphis, Indianapolis, that feed out of state investors that in turn feed huge tough landlords like Wise, because we just don't have a lot of that distressed housing stock or distressed low-income tenant populations. 

    Columbus was (and still is) pretty boring, vanilla. It never had any boom, and no real bust except for the same housing crash in 2009 that everyone else did.  Our industries have always been nerdy type things like being the state capitol, a huge university, and banking, insurance, finance, logistics, etc.  Stuff that just never required huge amounts of housing to get done.

    Now in the 2020s, the boom is technology, and Columbus is in its prime. We are attracting all sorts of companies working on "boring" tech things like medical logistics, prescription streamlining, automating insurance processing, healthcare analytics, etc. All high-paying jobs in very practical and reliable industries...

    So how does this relate to all this?  Our local economy is booming when it really never did before.  Educated, easily employable people who will continue to earn money are moving here for the jobs mentioned before (and still very affordable compared to many other tech cities). These people buy houses and maybe even start their own companies here in town, doing equally obscure and boring high-income technology type things. And as they do, they put upward pressure on our housing market that was built for a much smaller population. 

    Thus, our demand is completely out of line with the existing supply when you account for normal local demand.  Then you have smart people from the bay area or new york or wherever do their research and realize what Columbus is, and they buy too. Combine that with insanely low interest rates and you have a recipe for the current Columbus "gold rush" in housing.  

    Will this continue? Honestly I think it will as long as current trends continue...  However, this is not a Paris or London or a fancy stock like Tesla or whatever.  It's just a "boring" midwestern tech city with extremely strong housing demand due to our own local tech boom and the unusually low inventory for this part of the county...

    And previously where the entire midwest was mostly about cashflow (eg James Wise type places) now Columbus is changing to an appreciation market, even moreso than the rest of the country.

    Another however: betting on continued appreciation can be just speculative gambling, especially assuming we will have 21% .. The fantastic growth through the entire country is pretty easily proven to be the combination of recovery from a major crash, extremely low interest rates, lack of housing due to housing construction stopping after the crash, etc.  Columbus is no exception, nor our slums and D-class areas.  "All Boats Float When the Tide is in" and the tide absolutely rushed in. However that rush can't continue, eventually growth will naturally level out as the free market goes back to sanity, and may even recede. 

    Another thought, buying for cashflow here is tricky since our D areas probably will stay D. New investment will improve the housing stock, but like any city we have our slums and major social problems, and those people are not going to get any richer.  Some of those areas such as South Linden were original redline areas. They were originally intended to be slums, and have poor infrastructure, tiny lots, crappy construction, far from grocery stores and freeways, etc. People with money don't like living in those areas, so you have to think about rental appreciation on top of price appreciation.  Sales prices are skyrocketing but rents arent in those C-/D areas.  Just something to keep in mind.

    If you want to buy here, buy to be a long term buy and hold investor who believes in the fundamentals of a nice friendly boring reliable midwestern city, but recognize now this is a boom town in the sense of the modern boom.  I think the slope will drop off in the coming years, if you have money to park its not a bad place, but if you think you are going to get continued 21%, it is a real gamble.

    8Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    5y
    Originally posted by @Mike B.:

    @James Hamling

    The second paragraph of your last post is interesting and something I think about quite a bit. I generally agree with your assessment, but do you think that with all of the capital floating around combined with all the hype surrounding real estate there's a possibility of continued price appreciation/cap rate compression from investors willing to pay more for the same NOI?

    The short answer is absolutely! Here in MN, and I have heard in other markets similarly, we have already seen this big time especially in the popularly known market centers such as Minneapolis. I see playing out a next step now of "dumb" money chasing this NOI compression into net negative territory and using market value ascension (speculation) to justify the acquisition. And "smart" money looking around for the opportunities such as surrounding suburbs to Minneapolis and or other state metro-plex's of lessor known names but still with same/similar state market advantages and far superior performing numbers thanks to value ascension just beginning vs capping out. I call this "Gypsey Capital" lol.

    With all this playing out, it's heading towards an air tight market for deals in the next 12-18 months (that's my opinion/projection). Yeah, I feel the comments already of "it IS a tight market", what I am talking about is a far tighter market, imagine a market so tight that you say "man, I wish it was as easy to get a good buy as it was back in early '21'", THAT tight. 

    And at that time, maybe cycle back to that "dumb" money as they start to default thanks to operational headaches and 0 contingency margin. REI is a river, always cutting new path.

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