$1,500 Toledo Land Bank House to $1,300/Mo Rental, 7 Years Later, Before & After Pics

Toledo, Ohio
General Real Estate Investing
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$1,500 Toledo Land Bank House to $1,300/Mo Rental, 7 Years Later, Before & After Pics

Derek DeVerna
Real Estate Broker · Toledo, OH · Member since 2019 · 57 posts · 73 votes

Investment Info:

Single-family buy & hold, Toledo, OH. Purchase $1,500 | Rehab $87,812 | All-in $92,231, cash | Rent $1,300/mo

What made you interested in investing in this type of deal?

This was my first deal after moving home to Toledo to go into business for myself full-time. I wanted a project that would challenge me and force me to build a large team of reliable vendors and contractors.

How did you find this deal and how did you negotiate it?

I found this Lucas County Land Bank listing on the MLS and represented myself as the buyer's agent.

How did you finance this deal?

Cash. This property is free and clear.

How did you add value to the deal?

Pulled permits, added a full bath, and spent $86 per square foot to rehab the entire house top to bottom. 25 contractors tried out on this deal alone.

What was the outcome?

Same residents since April 2020, great stewards whose care keeps adding value. Average cash flow of about $12,400 a year from 2021 through 2025.

Lessons learned? Challenges?

Despite going over budget ($48K estimated, $92.2K all-in before move-in), I refused to sacrifice the quality of the final product. Ultimately, that allowed us to attract very high-quality residents. This is still a core philosophy of the business today.

This house became the foundation of the 100-unit portfolio we manage today through our licensed Ohio brokerage. We still use many of the vendors, suppliers and systems developed on this first deal, though they've been refined over the years.

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  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 687 votes
    1d

    Great breakdown, Derek. The number I'd pull out is the all-in, because it's what makes the return real. $12,400 a year on $92,231 is about 13.4% cash on cash, with no loan involved.

    On the books, the $1,500 purchase plus the $87,812 rehab (and the closing and carrying costs that took it to $92,231) is generally all basis, not expense. Less land, that gets depreciated over 27.5 years, which is roughly $3,350 a year if land is small. So the tax return on that $12,400 of cash flow likely showed closer to $9,000 of income. Some of the rehab, like appliances or flooring, may have been shorter-lived property, which would have sped that up.

    The lesson I'd take for anyone reading: with 25 contractors on one house, a project ledger by trade is what lets you separate repairs from improvements at the time instead of guessing later. Going from a $48k estimate to $87.8k is a lot easier to learn from when every invoice has a home.

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  • Jimmy Samaha
    Staten Island, NY · Member since 2013 · 127 posts · 60 votes
    22h

    Nice work, Derek. Same residents since April 2020 is probably the biggest reason this one performs the way it does. $1,300 a month is $15,600 a year, so $12,400 of cash flow means you kept about 80 percent of the rent, which only happens when there's no vacancy and no turnover cost for years.

    For anyone reading who wants to copy the deal, I'd still underwrite a new one with a real vacancy and turnover cushion instead of expecting to keep 80 percent of the rent. The long term tenant is something you earned by doing the rehab right, but it's not something you can count on going in.

    Also a good reminder that a $48K estimate turned into $92K all in. Plenty of people would have cut corners at that point, and it sounds like finishing it properly is what paid off.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    19h

    Derek, this is a great example of how the right amount of work can completely change a property. Going from a $1,500 purchase to a fully renovated $1,300/month rental is pretty impressive.

    One thing I'd add as you scale from this first deal toward 100 units is to keep a close eye on the tax side of all that renovation spending. With $87K+ going into the property, making sure improvements, repairs, and other project costs are being tracked correctly can make a meaningful difference to your depreciation and future basis.

    I'd also start looking at each property's after-tax return, not just cash flow. What works on a $92K all-cash SFR can look very different as you move into larger acquisitions, and that's where depreciation and cost-seg opportunities can become more meaningful.

    Great first deal, and clearly the systems you built around it ended up being worth as much as the property itself.

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  • Andrew FidlerBusiness Member
    Real Estate Broker · Toledo, OH · Member since 2011 · 386 posts · 434 votes
    7h

    @Derek DeVerna - Quite the project to bite off first-time through, my friend!

    It's been 15 yrs since I did a Lucas County Land Bank deal, I just put an offer in for one two weeks ago and can't say I came away feeling the reception (and promised financial colonoscopy) was worth it.

    Sure, I would have landed a $20k property for $5k but the title would have been been encumbered until I passed their hoops and interestingly enough my "I own a property management company we will be using contractors and pull permits" was met with a demand I was to identify who was going to be working and how much I was paying them...this was at the time of the first offer. (Contractors and pricing aren't solidified until the day I want the work started and the contractor's schedule and budget are in line with my own)

    I concluded I will stay with my usual...avoid bureaucracy because the simplicity gives you the same savings without the headache.

    Derek - if you had just purchased the house outright how many upgrades would you had declined because you didn't have the Land Bank as an overseeing partner?

    You can DSCR the cash back out of the property I'm quite sure, a financier should be excited to see all those permits pulled!

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