Why I'd focus on Fix and Flip, not renting in Toledo, OH

[Frank Barletta]

Honestly, I would have never guessed that this market is actually not great for rental investments and real strong for fix and flips. Who knew?!

Here is the scoop:

About this Market: Toledo, OH, emerges as a prime market for property flipping, thanks to its combination of affordable purchase prices, economic revitalization, and strong rental demand. The city's ongoing cultural and economic resurgence, supported by proactive local government incentives, enhances property values and attracts a growing population. Strategic geographical positioning near major Midwest cities further amplifies Toledo's appeal, offering investors significant ROI potential through both immediate flips and long-term rental strategies. With its diverse economic base stabilizing the rental market and a community-centric revitalization in full swing, Toledo stands out as a surprisingly lucrative market for real estate investors looking to maximize their investments.

Market Trends and Growth

Price Growth in 43620

• Homes with 5+ Bedrooms: In the past year, these properties have shown a substantial increase in median sold prices, rising from $139.9K to $167.4K, a growth of 19.7%. This indicates a strong market demand and a promising opportunity for investors.

Days on the Market (DOM)

• Reduced Sale Time: The average sale duration has decreased from 86 days to 67 days year-over-year. This improvement suggests a growing buyer interest and possibly limited inventory, creating favorable conditions for quick turnovers.

Toledo OH - RE Analysis (April 2024) - House Sales (1).pdf

Demographics and Economic Factors

Population and Economic Characteristics

• Population Size: With a smaller population of 5,341, 43620 offers less competition in buying and selling, which is beneficial for flippers targeting niche market needs.
• Income Levels: The lower median household income ($27,442) suggests a demand for affordable, refurbished homes—ideal for flipping projects aimed at cost-sensitive buyers.

Housing and Ownership Trends

• Renter-Occupied Properties: A high percentage (68%) of renter-occupied properties indicates a transient population, potentially less targeted for flipping. However, converting these into desirable, owner-occupied homes could capture untapped market segments, particularly as economic conditions improve.

Age Distribution and Market Demand

• Diverse Age Groups: The presence of young adults and an aging population suggests varied housing needs—from starter homes to downsizing options. Tailoring renovations to these demographics can maximize appeal and marketability.

Comparative Analysis with Surrounding Zip Codes

• 43613 and 43615: These areas, with higher median incomes, might offer opportunities for higher-end flips but may also face stronger competition and higher property costs.
• 43606 and 43608: While the potential exists, these zip codes may not experience the same level of market appreciation as 43620, which could affect profit margins.

Strategic Recommendations

Investment Focus in 43620

• Cost-Effective Renovations: Focus on upgrades that enhance fundamental property values, such as kitchen and bathroom remodels and improvements in curb appeal. These will likely attract both renters looking to become homeowners and first-time buyers seeking affordable options.
• Target Market: Position properties to appeal to the existing rental demographic and potential homeowners by offering competitively priced, well-renovated homes.

The big flip, but remember the 70% rule of flipping: 2032 Robinwood Ave, Toledo, 43620

This is the type of home that would work perfectly for the demand, however, this should be converted to a multifamily property most likely a triplex. The most recent comp to sell was 2114 Robinwood Ave, Toledo, 43620 which was converted to a Triplex and sold 8/4/2023.

Ensure the purchase and renovation costs adhere to the 70% rule relative to the after-repair value (ARV), which is estimated at $250K for sound investment planning.

[Dave Poeppelmeier]

Quote from @Engelo Rumora:

Quote from @Dave Poeppelmeier:

Quote from @Engelo Rumora:

Quote from @Frank Barletta:

Quote from @Engelo Rumora:

Quote from @Andrew Syrios:

I don't know a lot about Toledo but generally speaking with rates having skyrocketing and prices still creeping up, it makes it very difficult to cashflow on a rental if you use debt. So generally speaking, it's a better time to flip than to buy rentals for the time being. (House hacking is an exception.)

Who uses debt?

Only cash mate hehe 😁

 I wish that were the case, but not everyone has cash or wants to tie up their liquidity. It also doesn't allow to scale faster, so its not a strategy for everyone.

Slow and steady wins the race mate.

Too many guru's and marketing companies pumping leverage to rookies because they make more money, the more somebody buys.

Being patient and using all cash to begin is always safer in the long run.

Build the foundation of your portfolio with cash and make it strong.

After a few years, look at using leverage for faster growth.

And only after you have experienced the true income and expenses of your portfolio and not just paper figures.

Cash is King
Cashflow is Queen
Leverage is the Peasant 

Just my opinion 🙏

To anyone reading this thread, you do NOT need to have tons of cash to invest in RE. You make money in RE by solving problems, and in my opinion, buying "turnkey" properties with cash solves the least number of problems. 
My wife and I started in RE having come from no significant family money. My parents were able to pay for most of my college tuition, my wife's parents paid for even less. We were caught in the Rat Race, me working as a Physical Therapist and my wife as a teacher until our 2nd child came along, and we did the math and found that 2/3 of her take home income would go towards child care. So, she stayed at home with the kids and I busted my *** on the weekends to make up that extra money. 

We bought our first property by cashing out what money we had left from our 401k, took the penalty hit, and made the down payment. We were all in on RE, putting all of our extra money we saved toward the next down payment and the renovations. We bought one more house the next year, and one more the year after that. But, a funny thing happened on our way to the Forum: we were able to learn first hand how to manage properties, deal with renters (including the House from Hell and the Renters from Hell on our 3rd property), what to look for in deals, etc. Every house I put a ton of sweat equity in to save money.

The year after that, we sold those 3 and bought our first few Student Rentals. Having participated in our local REIA and other Real Estate groups (Toledo PIN), people started to know what we were doing. Then houses started finding us in addition to the MLS. My wife got her Real Estate license to start looking for houses ourselves, and I was eventually able to leave my W2 job as a PT that I hated and despised, and because a Realtor as well. We are now up to 23 properties, with our goal being 25. We are cash flowing great, and continue to pour those profits back into our houses by replacing roofs, painting/siding, and improving the properties to make them more appealing and to get the Cap Ex taken care of. Once we get half of those Free and Clear, we will be financially independent. When all are Free and Clear, we can do whatever we want essentially. 

I tell this story because if we waited to buy a house with cash, we would have never done it. Life would have happened, the money would have gone somewhere else, and I wouldn't be loving the life I currently live in Real Estate. Most people don't have jobs in Silicon Valley with money to burn and buy turnkey houses for cash. There is no "safe" investment in the stock market, real estate, etc., but you have to roll the dice and get in the game. We have had several craps and 7's, but we've hit a lot of points as well. 

#getinthegame
#financingisfine
#workhard
#rollthedice

Thanks Dave,

I agree for a realtors sake. Why buy 1 for $100,000 in cash when you can help them get leverage. Use the same capital to buy 5 and you make the 5 x the commission, right?
 

Make intro to contractor and PM, maybe make a few extra bucks also? 

I feel sorry for all of the over leveraged folks when interest rates shot up like they did last year. Especially the ones that had adjustable portfolio loans. Each to their own and nothing personal but there is also the other side of the spectrum where folks don’t know what they are doing, use stupid leverage and get into a lot of trouble. Not related to “turnkey” as you stressed. 

Thanks and keep being great 👍 

That's the thing Engelo, is that it doesn't matter if I was a Realtor or not regarding building MY portfolio. Why would I take commission on a house I bought and get taxed on it? 

Also, I don't expect kickbacks from people I introduce my Investor clients to. I simply want contractors and PMs to take care of my clients, so they have a great experience investing in Toledo. 

What I'm talking about is how the little guy can use leverage to get into the game and not have all of their money tied up in one property. If that one property goes bad, the whole portfolio goes bad. If they used that $100k to put down payments on 4 properties and one goes bad, the other 3 are still working. 

You have your niche in turnkey properties, and that's fine. But I'm telling the little guy to not feel like they can't get started because they don't have $100k sitting around to buy in cash. 

[Engelo Rumora]

Quote from @Dave Poeppelmeier:

Quote from @Engelo Rumora:

Quote from @Dave Poeppelmeier:

Quote from @Engelo Rumora:

Quote from @Frank Barletta:

Quote from @Engelo Rumora:

Quote from @Andrew Syrios:

I don't know a lot about Toledo but generally speaking with rates having skyrocketing and prices still creeping up, it makes it very difficult to cashflow on a rental if you use debt. So generally speaking, it's a better time to flip than to buy rentals for the time being. (House hacking is an exception.)

Who uses debt?

Only cash mate hehe 😁

 I wish that were the case, but not everyone has cash or wants to tie up their liquidity. It also doesn't allow to scale faster, so its not a strategy for everyone.

Slow and steady wins the race mate.

Too many guru's and marketing companies pumping leverage to rookies because they make more money, the more somebody buys.

Being patient and using all cash to begin is always safer in the long run.

Build the foundation of your portfolio with cash and make it strong.

After a few years, look at using leverage for faster growth.

And only after you have experienced the true income and expenses of your portfolio and not just paper figures.

Cash is King
Cashflow is Queen
Leverage is the Peasant 

Just my opinion 🙏

To anyone reading this thread, you do NOT need to have tons of cash to invest in RE. You make money in RE by solving problems, and in my opinion, buying "turnkey" properties with cash solves the least number of problems. 
My wife and I started in RE having come from no significant family money. My parents were able to pay for most of my college tuition, my wife's parents paid for even less. We were caught in the Rat Race, me working as a Physical Therapist and my wife as a teacher until our 2nd child came along, and we did the math and found that 2/3 of her take home income would go towards child care. So, she stayed at home with the kids and I busted my *** on the weekends to make up that extra money. 

We bought our first property by cashing out what money we had left from our 401k, took the penalty hit, and made the down payment. We were all in on RE, putting all of our extra money we saved toward the next down payment and the renovations. We bought one more house the next year, and one more the year after that. But, a funny thing happened on our way to the Forum: we were able to learn first hand how to manage properties, deal with renters (including the House from Hell and the Renters from Hell on our 3rd property), what to look for in deals, etc. Every house I put a ton of sweat equity in to save money.

The year after that, we sold those 3 and bought our first few Student Rentals. Having participated in our local REIA and other Real Estate groups (Toledo PIN), people started to know what we were doing. Then houses started finding us in addition to the MLS. My wife got her Real Estate license to start looking for houses ourselves, and I was eventually able to leave my W2 job as a PT that I hated and despised, and because a Realtor as well. We are now up to 23 properties, with our goal being 25. We are cash flowing great, and continue to pour those profits back into our houses by replacing roofs, painting/siding, and improving the properties to make them more appealing and to get the Cap Ex taken care of. Once we get half of those Free and Clear, we will be financially independent. When all are Free and Clear, we can do whatever we want essentially. 

I tell this story because if we waited to buy a house with cash, we would have never done it. Life would have happened, the money would have gone somewhere else, and I wouldn't be loving the life I currently live in Real Estate. Most people don't have jobs in Silicon Valley with money to burn and buy turnkey houses for cash. There is no "safe" investment in the stock market, real estate, etc., but you have to roll the dice and get in the game. We have had several craps and 7's, but we've hit a lot of points as well. 

#getinthegame
#financingisfine
#workhard
#rollthedice

Thanks Dave,

I agree for a realtors sake. Why buy 1 for $100,000 in cash when you can help them get leverage. Use the same capital to buy 5 and you make the 5 x the commission, right?
 

Make intro to contractor and PM, maybe make a few extra bucks also? 

I feel sorry for all of the over leveraged folks when interest rates shot up like they did last year. Especially the ones that had adjustable portfolio loans. Each to their own and nothing personal but there is also the other side of the spectrum where folks don’t know what they are doing, use stupid leverage and get into a lot of trouble. Not related to “turnkey” as you stressed. 

Thanks and keep being great 👍 

That's the thing Engelo, is that it doesn't matter if I was a Realtor or not regarding building MY portfolio. Why would I take commission on a house I bought and get taxed on it? 

Also, I don't expect kickbacks from people I introduce my Investor clients to. I simply want contractors and PMs to take care of my clients, so they have a great experience investing in Toledo. 

What I'm talking about is how the little guy can use leverage to get into the game and not have all of their money tied up in one property. If that one property goes bad, the whole portfolio goes bad. If they used that $100k to put down payments on 4 properties and one goes bad, the other 3 are still working. 

You have your niche in turnkey properties, and that's fine. But I'm telling the little guy to not feel like they can't get started because they don't have $100k sitting around to buy in cash. 

Thanks for your reply mate,

Nobody is telling the little guy not to invest.

I stressed what I think is a safer way of investing.

If our turnkey model allowed leverage, we would have 10xed our business since 2014.

I just don't believe in the model and me saying "all cash" is definitely not benefiting my company...

To your example, the investor uses $100,000 to buy 4 properties at 90% LTV and a black swan event like Covid or interest rate hike happens and 3 go vacant and 2 need major turns.

Then what?

But this is Potato, "Potato" talk.

Could happen or like in your case, one can build a large and successful portfolio and do really well.

Hat's off to you and well done mate

A great way to think about real estate and business in general is protecting the bottom line first and foremost and looking at things from a worst case scenario standpoint.

All good things take time.

Appreciate you mate and I've heard great things about you.

To your success

[Frank Barletta]

Thank you for contributing here, @Dave Poeppelmeier. It's a great story and one I cherish because my wife and I are walking a similar path (like many of us here).

I look forward to hearing more from you!

[Drew Sygit]

Many Midwest cities, Detroit, Cleveland, Toledo, Columbus, Indianapolis, Memphis, etc.,  (this will set off a LOT of BP Alerts!) offer the same opportunity of relatively low entry costs vs decent rent rates.

Yes, it's tougher to use debt for acquisitions due to higher interest rates (which aren't going down anytime soon - sorry if you don't know that!).
---The market will eventually adjust with prices flatlining or slightly lowering.
---Investors that are ahead of this and already making lower offers can stll make the numbers work NOW.

Yes, you can fix & flip to landlords, but you better know what you're doing or you won't make much profit, if any. 
---Your fix & flip for a landlord should be "tenant-proof" with a rehab budget at least 10-20% smaller than a flip to an owner-occupant, so the landlord can make their cashflow work.
---Pretty much what turnkey companies do!

In 24+ years, haven't seen a REMOTE flipper have any success targeting flips to landlords.
---Their margins are always too thin!
------Rarely connected enough locally to get properties cheap enough and they get ripped off by contractors who know they aren't closely being managed/monitored.

You can run all the numbers you want, but they're just a TOOL. 
---Just like the infamous "1% Rule" that many newbies blindly use without understanding!
---At some point you need to turn your numbers into reality...

[Frank Barletta]

Quote from @Drew Sygit:

Many Midwest cities, Detroit, Cleveland, Toledo, Columbus, Indianapolis, Memphis, etc.,  (this will set off a LOT of BP Alerts!) offer the same opportunity of relatively low entry costs vs decent rent rates.

Yes, it's tougher to use debt for acquisitions due to higher interest rates (which aren't going down anytime soon - sorry if you don't know that!).
---The market will eventually adjust with prices flatlining or slightly lowering.
---Investors that are ahead of this and already making lower offers can stll make the numbers work NOW.

Yes, you can fix & flip to landlords, but you better know what you're doing or you won't make much profit, if any. 
---Your fix & flip for a landlord should be "tenant-proof" with a rehab budget at least 10-20% smaller than a flip to an owner-occupant, so the landlord can make their cashflow work.
---Pretty much what turnkey companies do!

In 24+ years, haven't seen a REMOTE flipper have any success targeting flips to landlords.
---Their margins are always too thin!
------Rarely connected enough locally to get properties cheap enough and they get ripped off by contractors who know they aren't closely being managed/monitored.

You can run all the numbers you want, but they're just a TOOL. 
---Just like the infamous "1% Rule" that many newbies blindly use without understanding!
---At some point you need to turn your numbers into reality...

 Appreciate you stopping by and sharing some wisdom!

[Andrew Syrios]

Quote from @Frank Barletta:

Quote from @Andrew Syrios:

I don't know a lot about Toledo but generally speaking with rates having skyrocketing and prices still creeping up, it makes it very difficult to cashflow on a rental if you use debt. So generally speaking, it's a better time to flip than to buy rentals for the time being. (House hacking is an exception.)

Well said @Andrew Syrios - Thank you for sharing that.

 Thanks Frank!