All Forum Posts by: Lori Williams

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $38,000
Cash invested: $40,000

SFH, 3 bdrm, 1 bath. Ceiling to floor rehab, new furnace, new windows, added central a/c. Rents for 1400.00

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

Retirement

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

MLS, through a realtor

How did you finance this deal?

Cash, then refi

How did you add value to the deal?

Ceiling to floor rehab

What was the outcome?

High demand when advertised

 Hi Darsh.

It's hard for an OOS landlord to find much support by local folks in Ytown because we have a ton of OOS landlords who are, for lack of a nicer description, slumlords (or they insist on trying to make the houses into rehab houses, which means we have to go down to city hall, fight them and get them shut down).

They look at Ytown as cheap, disposable properties, they don't bring them up to code, they rent to the first crackhead with 500.00 in their pocket, 3 mos later the crackhead has skipped out without paying rent, damaged the property, and the landlord just rents it out to a similarly situated tenant, rinse and repeat.

This makes the neighborhoods worse and keeps our property values down further than they should be. 

For example, I buy in a very tiny neighborhood exclusively. It's like 1 street. I have multiple California investors and several other out of state investors on this little street. None of their properties are up to code, most of their tenants are awful. That makes it very difficult for me, because I invest heavily in my properties and rent to professionals. And no one wants to pay premium rent and then live next to hillbillies who are loud, messy or have 5 large dogs that they let run loose.

TBH, most of the locals investing in Youngstown (OK, maybe not most, but many) are trying to make the city nicer, because it's their city. They see the properties as a lifelong investment, they want the property values to go up, they want the properties taken care of, and the OOS landlords have made this difficult. OOS landlords have not been good for the city, and it all boils down to they don't care about the city and seem to view it as one giant hood. They are looking for D properties, and they are F landlords.

Of course, your company may not be like that. I just wanted to explain why perhaps the feedback you were getting seemed maybe less than what you were hoping.

I'd recommend specific areas of Youngstown, OH. High cashflow, DSCRs of 2-4. Being part of a partnership with someone local would help with being a long distance investor.

Disclaimer: I am not a realtor. I'm just an investor who is doing extremely well where I buy.

I would recommend working with a partner if you're going to do out of state. There are a lot of ways to structure the partnership, but by doing so, you'll have a LOCAL person as part of the project.

I invest strictly in a very small neighborhood in Youngstown, OH. We are at 2%+ with DSCRs of 2-4. We are less expensive overall than Akron and Cleveland, and if you buy in the right area, you will have an excellent ROI.

PS: we do not do section8 or low income. We rent to professionals.

 Dave, thanks for the explanation.

I have a similar situation. I have a SFH that has always had a separate living area in the basement. It has been rented out for a couple years as a SFH (so it's been depreciated as a SFH since we bought it), but we want to move into the basement and use what amounts to less than 1/3 of the total available square footage (including the basement).

Basically, the renters get the actual house, we would be living in a small basement apartment. It is not formally duplexed, but there is a separate entrance to the basement.

So how would I go from SFH rental to SFH with personal use of 1/3 of the house and rental use of 2/3 of the house?

We probably won't live in the basement apt forever, so this would be temporary.

Thanks for any insight you can offer, bc the tax software is not helping me at all with this.

 I'll agree that some of the out of state investors are the worst. Some look at Ytown properties as "disposable" because they can be so inexpensive, so they basically just do nothing to them and rent them as high as they can while they crumble to the ground. I'm not a fan of these sort of investors, because they don't care about the city and will rent to the first person with 500.00 in their pocket (and then they have to deal with bad tenants, tenants who don't pay, tenants who destroy the property or who are generally bad neighbors for the rest of the residents - and they never figure out what they are doing wrong)

But it's the same situation in Cleveland and Akron (and probably every other larger city). Investors are increasingly buying out of state. And I suspect hot spots like Cleveland are even worse when it comes to inflated pricing and a need for low income housing, and investors buying up the inventory.

My rents are actually some of the highest in Youngstown proper, but I rent to professionals, as opposed to low income/section 8, and put the money into the properties to justify the rents (new stainless appliances, central a/c, new flooring, designer paints, higher end light fixtures, new furnaces, hot water tanks, bathrooms remodeled, quartz countertops, etc). There's no way I could afford to do even half the rehab I do and rent the properties out for the low income price levels, and I cannot justify not fixing the properties up (they are an *investment* and as such, keeping them in good working order protects my investment)

We will never get the situation with the out of state (or local) slumlords fixed until the city gets serious about enforcing code with landlords. 

But the cost of buying, rehabbing, insurance, tax and interest rates isn't cheap right now, so it's a trade off - you either have crappy rentals that are priced low, or you have well maintained rentals that are priced higher. And if the city would actually enforce their codes and all the landlords had to upgrade their electric and plumbing, pay for mold remediation, etc, then rents necessarily have to increase, because that stuff isn't cheap (and it doesn't help that the state and county love raising property taxes based on overinflated values)

There are plenty of houses in Youngstown that could be decent rentals. But the city really doesn't incentivize investment for lower income housing enough to keep the rents low but the condition/quality good. I'm not sure how a landlord who is charging 500.00/mo for a duplex rental or 700.00 for a SFH rental can afford to pay water, trash, and keep everything updated and put a new roof on or a new furnace in when it comes time for those major expenses, on top of their mortgage, tax and insurance.

 Sure thing :)

Here's the thing about Youngstown: there's almost no place in the country that's less expensive to live. Housing, food (no tax on food and if you go across the border to PA, there's no tax on clothing), taxes, etc. We were hit hard with the steel mill closings in the 1970s - 1990s, and we've had a hard time coming back. But we have minor league baseball and hockey, college basketball, baseball and football, 2 drive in theaters, 2 lakes, 2 malls, multiple golf courses, country clubs, 2 skating rinks, an ice skating rink, museums, orchestras, theaters, some amazing parks, and tons of great food - all within 5 - 30 min away. 45-60 min away you have Amish country, major league baseball, basketball and football, Lake Erie, casinos, 3 airports, etc. You can get to Cleveland, Akron and Pittsburgh in about 45 min - 1 hr and 15 min (depending on where in the cities you're going). Columbus is 2 1/2 hours away.

But best of all? No real traffic! You can drive 60 miles in 60 minutes. Convenient hwy system without traffic jams :)

People working remotely *should* move to Ytown - they can enjoy the big city paycheck, and the small city cost of living. They can easily drive or use the bus lines. Or even bike.

In my case, I'm creating my own market. I'm buying up a street. I bought some empty lots. Hope to build a small pavilion, and in the summers bring in food trucks once a week for the rental community I'm developing. 

I won't do section 8. The truth is more section 8 housing is needed, but there's pretty much no housing at all in Ytown for professionals who want to live near where they work. Overall, my tenants pay on time and I have less issues with maintenance and remodeling in between tenants. I'm able to take 1st, last and security for deposits and my security is 250.00 - 500.00 more than my monthly rent amount - I can't do that on section 8. But those extra deposits create a mindset with the tenant that they want to get that money back, so they try harder to take care of things. (I'm not saying all section 8 tenants are rough on rentals, but enough are that I can't risk it. Also, my rents are about 2x what section 8 pays, so most section 8 tenants wouldn't be able to afford the rent)

All that said, there are a lot of people who make really good money with section 8.

I would call Ytown a cashflow market primarily. But because we have been suppressed on property values for a long time, we are an appreciation market, too (just at a slower pace than the cashflow). Key in this city is to find areas that are gentrifying.
 

Where did you hear 5% interest? I've read interest needs to be paid, but it's along the same rates as banks pay in a regular checking or savings acct, which is practically nothing, and not a large enough sum to make a dent in your pocket. Make sure your lease requires the property to be cleaned (make sure it's clean when they move in), and undamaged. If they damage the property, leave it dirty, etc, you're not going to have to worry about a few dollars in interest.

I am in Youngstown and am creating my own market. Examples: 1st house rehabbed and rented in 2017: bought for 38k, rehabbed for 40k, currently renting for 1200.00 (discounted rate for disabled vet). Last house I rehabbed and rented in September 2022: bought for 23k, rehabbed for 60k, currently renting for 1600.00. 

I am targeting a class of renter no one else seems to be targeting, which is kind of making me the only game in town for this class of renter.

And investors entirely overlook Ytown - all they see is some noise on the internet and they don't really know the area. So they look to Akron and Cleveland and Toledo, under the impression we're still all about steel mills. 

More than half of the city is renters. Almost all rentals are targeting lower income and section 8. That leaves non-low income and non-section 8 renters wide open markets. And contrary to what seems to be the belief, there is quite a bit of higher income earners in the city who would love to live closer to work rather than 20-30 minutes outside the city in the burbs.

The important thing is to get to know the market you want to invest in. That is the key to being able to develop your strategy and know where to buy to make that strategy successful.

Hi. I have a rental that I'd like to turn into my primary. NOT to avoid capital gains and then sell it after a couple years. This would be turning it into a primary and living there probably the rest of my life.

So my questions:

1. Is it better to transfer from LLC to our name? Or for us to buy it for what's owed on it from the LLC?

2. If we never sell it, how do they handle the depreciation taken? 

3. Is there a length of time you can live in it so that when you die, your heirs aren't paying capital gains on it?

We do not want to do a 1031 exchange on it (at least we don't think we want to)

Thank you and if there's any other info I should know, thanks for that, too.

I've looked online and all I can find is info on ppl who move into their rental to try to avoid capital gains when they sell in a couple years, and that's just not our situation.