All Forum Posts by: Christopher Abele

Yes - I'm local. Focused specifically on buy & hold SFH's in Toledo.

Might be worth noting that the people who are responding aren't boots on the ground in Toledo. . . 

If you're looking for a local real estate agent / personal investor, @Dave Poeppelmeier is an active member of BP. 

@Tabish Masood

I think your numbers are off unless your intent is to be a slumlord.

1.) 50-65k houses in Toledo aren’t going to be great, turn key low maintenance homes. $100 / month for maintenance isn’t going to cover much for an OOS investor who needs to pay for labor.

2.) You've left nothing for CapEx.

3.) If you’re renting a $65k house for $1k, it’s not going to be in a great area; thus a higher probability of tenants that trash the place or drawn out evictions.

4.) Are you aware of the lead ordinance in Toledo and implications? Those costs are more likely to be associated with houses that can be purchased in the price range you’ve listed.

5.) What value are you bringing to the deal if you’re looking for someone to front the cash? Looks like you’re not boots on the ground nor does it appear you have a great understanding of the Toledo market.

Anyone who decides to participate in a JV based on this example underwriting is going to end up under water with you.

If you're buying in a seller's market, off the MLS or with realtors involved... Why would a seller ever be willing to accept a lower offer in all cash than a financed offer? I can think of a few scenarios (falling out of contract, concerned it won't appraise, still in home and doesn't want all the traffic, etc.) but for most owner-occupant sellers they don't care as much about the financing as they do the "total dollar amount."

In fact, most people don't realize that, even though they've agreed to $200k they're only going to see about $188k if they sell through a realtor. 

Unlike the coasts, Toledo is pretty mainland. It doesn't experience the rapid appreciation that you see on the coasts but it also doesn't experience the rapid declines; that is to say we have significantly less variance over time from "mean" pricing.

"Tell me you studied economics without telling me you studied economics."
I can tell you firsthand that council has no concept of any of these terms. Inelastic Demand? Externalities? Laughable. 

The reality is that they've made up their minds and their goal is to spend as many tax payer dollars fighting for this in the courts as possible so that they can declare a victory against the evil landlords. Or at least the little evil landlords, because fighting the big evil landlords - those who are most likely to have economies of scale and be able to address the concerns for a lower cost - would be even more expensive. 

I've kind of reached the point of not trying to fight with council. You'll never win because they don't want you to win and they have the power. So yes, in the communities where lead paint is most prevalent, rental costs will increase and the people that they are trying to protect will be harmed. I would provide your tenants the direct phone numbers for city council along with your letter why their rent is going up. 

@David I.

Real talk: are you familiar with the Toledo lead ordinance struggles?

Outside of the fact that it’s “not the best part of town” there are other challenges in Toledo with older properties - And if neighboring Maumee passes their new rental ordinance you can bet money Toledo will try to follow suit.

Adding to the convo, but based on market rents your best bet is Section 8.

If you’re using a PM and they are not listing it with LMHA, it’s time for a new PM.

Talk to me about "numbers don't add up."

$40k house that nets you 20k in immediate equity. 

At $900 / month, you're at $10,800 / year. Let's be pretty aggressive with our underwriting costs and assume:

$200 / month taxes

$45 / month vacancy (@ 5%)

$150 / month CAPEX & Maintenance - its a fresh rehab (unless you're spending $20k on lipstick)

$75 / month insurance

$135 / month PM (@15%, which is high.)

So expenses are $605 / month. At the $800 - $1,000 price point you'll likely have a section 8 tenant and, given the price point of comps, this isn't the best of neighborhoods so you're not going to get much appreciation. 

You will, however, have $295 / month in cash flow or $3540 / year. That's 9% CoC which, to be fair, isn't the worst thing in the world.

With some ballpark numbers (made up here) for an alternative exit strategy:

Rent it out for 2-3 years, then set it up with a rent-to-own program: 8 year lease at $1,100 / month. You'll pay insurance and taxes and keep title in your name; tenant is responsible for maintenance and upkeep beyond that. At the end of year 8, the tenant may purchase the home for $1; there is no equity transfer and the title and contract will sit in a land trust. When you sell, you just sold for a "loss" so there's no depreciation recapture. In 10 years you've doubled your money. I'm admittedly not being very nuanced with the numbers here, just throwing you a different idea - all while being pretty conservative with numbers and assuming no appreciation or real rent increases.  

@Jennifer Beavers am I reading this wrong or did you respond to posts from over 5 years ago?