The No. 1 Most Overlooked Real Estate Market

Let’s talk about the No. 1 market that no one is investing in and why they should.

OK, guys. Shameless plug warning. I’m going to be a bit biased because I am based in this market. I’ve done a lot of deals in this market, and I feel like a kid in a candy store.

Now, the funny thing is when I started and told people that I’m going to start this great company in Toledo, Ohio, they all laughed me out of the room. They all thought, “What’s this crazy Australian guy doing, and why is he going to Toledo to do real estate?”

The No. 1 Most Overlooked Real Estate Market

Anyway, fast forward many years, and I’m proud to say that I’m kind of the last one laughing. I say that because what I found—what still is the case to this day—is that there are a lot of individuals who prefer to stay away from tertiary markets.

For the last several years, there really hasn’t been that much activity in Toledo. The hedge funds have not come into town; they prefer to go into other markets, where I guess they can pump up the projections from a statistical standpoint—things like population growth, employment growth, large employers being in town, and whatnot. So, Toledo has avoided the hedge funds.

Let me give you another example: It doesn’t really have that sex appeal in the name. Toledo, Ohio, it’s a pretty small hub and there’s a population of around 608,000 people, including the outskirts. As soon as LeBron James went to Cleveland to play basketball, everyone’s in Cleveland. All the companies are there. All the turnkey operators, property management companies, and everyone else are posting online that they want to invest in Cleveland.

So, I always like to joke around that every John and his dog went to Cleveland to start a real estate company.

Once again, we in Toledo avoided that competition, too. No one has really been in Toledo to do the things that we’re doing (along with some other companies) out there. Therefore, from that aspect, it has always really stayed under the radar, which you’ll find with a lot of tertiary markets.

Look, I don’t know of any other markets in the country where you can get a better bang for your buck.

What can you buy in Toledo from a B-class standpoint? If you ignore all the talk online about properties $20-40K being “pig” properties, I can blow that out of the water. Anyone who comes to Toledo and goes through some of these neighborhoods with me, they can check out all the details. You will absolutely be mesmerized. It is unheard of.

In my opinion, whatever you’re buying and whichever price points, take the same amount of money and go somewhere else, and you are buying a C-class or D-class rough, high-crime-area property. Here, you are buying a solid asset, in a solid area, where your tenants are blue-collar, working-class people, who are hard-pressed for money. As such, they tend to stay and pay their rent.

Some of those key pockets of infrastructure here in Toledo that I think are great are around ProMedica Toledo Hospital, which is the biggest and richest employer in town. They’re heavily gentrifying the area and anything around any ProMedica facility is always great to buy.

Downtown is booming, there are many hotels opening up and bars. This is an exciting time to be in Toledo. The University of Toledo has around 20,000 students and is growing. The city’s great for young families and student rentals.

Then we’ve got the Jeep factory, GM Powertrain, and the Chrysler assembly plant—car manufacturers that stayed open during the global financial crisis. A lot of them went bust in Detroit; they didn’t go bust here.

Then we have the Washington Local School District, by far the most desirable school district in all of Toledo. There’s a lot of demand for properties for sale and rent in that area. A sweet spot that we like is the Five Points area. It’s not in the Washington Local School District, but it gets that overflow of great tenants because it’s right next door.

An interesting little fact about these areas is they used to be owner-occupied. But unfortunately a lot of these folks lost their home to foreclosure, so they had to move out. Regardless, they love the area, and the infrastructure supports a demand. They want to stay close to where they work, they want to send their kids to a good school, they want to be close to ProMedica, so they decided to rent.

A lot of these people who used to own back in the day are now tenants, so there is a sense of pride and ownership in the community. The areas tend to be well-kept, and the homes are well-kept. It’s hard to find a vacant home, because the neighbors will keep up all the yards.

I honestly think that Toledo is a hidden gem like no other. I’ve been here for six years now and don’t plan on going anywhere. There has been more talk of people starting to invest in the market. I’m seeing that happen, but it’s still a long way from some of the other markets.

Another thing to keep in mind if you are looking to invest in Toledo is I think it’s strictly a cash flow play. I don’t think you’re going to get any appreciation. If you do, it’s just a cherry on top. Historical trends show about 2-3%, which is just keeping up with inflation. As much as things are booming here, per se, the market has absolutely nothing compared to some of the others like Florida, Atlanta, and Texas—I mean those markets truly are booming. So it’s pretty flat here when it comes to that.

However, once again, I really don’t know of any other market where you can get a better bang for your buck. That’s me, that’s Toledo, that’s Ohio. I’m biased, and I know it.

I would love to hear from you!

Would you choose to invest in a market like Toledo? Why or why not?

Let’s chat in the comment section!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.