Investing in West Dayton Ohio and Getting 2%?

Question

In my brief analysis of the Dayton area single family home market, I don't see any way (short of getting a super screaming deal) of getting much greater than 1% (rent/appraised value) other than in West Dayton area.   From my general analysis, homes in "nicer" suburbs of Dayton just don't get distressed enough to come close to yielding 2% or are valued low enough vs projected rent.

So, my first question is: is my analysis off base here?

Investing in West Dayton would make me nervous given the level of crime and distressed neighborhoods in this part of the city.   However, I fully admit that I don't really know much about West Dayton other  local news crime reports and seeing some pretty sad homes on Zillow, etc.

Second question: are their parts of West Dayton that are better and safer than others?

Darrin Carey · Answer

@Christina Carey gave you a great summary. I'll be a little more specific. In areas like Huber Heights I'm finding deals to be in the 1.2%-1.4% range. A recent example is $975 rent for 80k turnkey, (or <70k if you find it and oversee your own rehab.)

In the 1.4%-1.6% range you can get a B property in an older neighborhood pretty easily. I like these as they typically come with little drama and good tenants.

A typical local 1.8%-2% property in a decent C area would be turnkey at $30-35,000 and rent for $600-700. These are my other target area, a little higher return, not much increase in drama.

You can get 2% in decent pockets all over Dayton, without going into the true warzones. You have to be careful though, neighborhoods can and do change. I will selectively pick up properties like this.

You can get 2.5%, 3%, 4% or more in the warzones, but there are significantly higher probabilities for excessive drama and issues, plus additional maintenance and vacancy could eat up that projection really quickly. It has to be disgustingly cheap for me to look at these, and I still may say no. I've turned down free houses at times. (Yes, FREE)

Personally, I tend to avoid areas where a 3 bedroom rents for under 600, that's an indication they're in areas that exceed my drama tolerance. You also run into the problem of Capital Expenses & Maintenance being too high in proportion to the rent.

Christina Carey · Answer

Well ... as a licensee, I cannot comment on the safety or desirability of a given neighborhood. There are websites that allow you to research crime stats though. I'm sure some other local colleagues who do not have a real estate license can add their two cents here. Like @Paul Amegatcher, or my other half, @Darrin Carey.

Since you are local, I would suggest you take a leisurely drive on a couple different days to check out the various neighborhoods (I'd make one of those trips on a Saturday night). Do it during nicer weather where you're more apt to see people out and about. Clues of a less desirable neighborhood are: several houses on the street are obviously vacant and abandoned; people are congregating on front porches everywhere on a weekday afternoon; the majority of cars parked in some obvious level of disrepair. Better neighborhoods will have little to no abandoned properties, cars in better condition, and congregating is more apt to be a weekend barbecue than a group of drug dealers on a street corner or a front porch.

For the record, there are neighborhoods on both sides of I-75 that are equally good, as well as those that are equally bad. The unwarranted stereotype that all of West Dayton is riddled with crime simply is not true. Unfortunately, it's also some of the REIA-type groups and real estate agents with elitist attitudes who share responsibility for perpetuating that falsehood. Dayton neighborhoods vary greatly from street-to-street and even block-to-block all over town.

Now, onto the 2% rule ... you are correct, the suburbs are generally not going to yield 2% unless you get a disgustingly good deal. And everyone is looking for that good deal. Basic laws of economics - supply and demand. If it's in a nice neighborhood with desirable schools, you're competing with owner occupants who will almost always pay more than an investor. In theory, the lesser return in those areas is offset by lower expenses in terms of turnover and maintenance. That's where you have to decide how much drama you want to deal with in exchange for those returns - if your tolerance for drama is higher, then you may fare well in less desirable areas. Or you hire a property manager and let them deal with it regardless. A good one earns every penny they charge and then some.

Paul Amegatcher · Answer

Great advice from both Darrin and Christina.  Hey Darrin send those free houses my way I have a marketing machine for getting them sold. 😂

Investing in West Dayton Ohio and Getting 2%?

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