Toledo Ohio investment will it increase value

[Adonna Villanueva]

Hi BP friends! I have a potential investment in Toledo Ohio 43607 and I'm still deciding if it's a good buy. I'm from out of state. I've noticed that the properties are cheap on that zip code less than 10k. I'm wondering if the properties will go up in value in the future. It seems like the value don't increase much from 2012. The property just need minor cosmetic fix like paint, make the hardwood floors shine again, kitchen drawers missing and garage gutters fix. I'm wondering if it's a good potential investment considering the value is so low but potential cash flow will be good. ROI will be 39%. Pretty good but the only thing holding me back is the value. Will it be good buy for BRRR later if it's low? I appreciate your advice. How can I force the value up?

Anyone here who’s a contractor or know an honest contractor that can help me fix up the house? I also might need a property management  the seller said he has one but I just wanted to have a backup if this will push through.

Thank you for all your help. 

[Andrew Fidler]

Before you buy any property anywhere you should:

Know your numbers forward and backward...purchase price, return and rent rate, cost to get it rented, who is managing and how much that costs, and what you do if you suddenly have to have cash and want to sell it.

Get a property inspection, I have a contract with a local company for a few hundred bucks they inspect any property my clients are interested in so we have an impartial view of the condition. (We just have to be on the same page that inspectors are paid to find problems and there is no such thing as a no-findings inspection...hairline cracks in a 50 yr old foundation or a basement that gets wet every Spring is not a crisis in the rental world)

Get an appraisal if financing is a concern...every property in Toledo suffers from appraisal discount in my opinion especially in cash-out refi situations, the less time between purchase and refi the lower that number comes back. I have seen many properties come back with a 60-80% valuation from purchase and advised that's much less the market value than the risk valuation the property receives in order to get a financier to invest along side you in real estate. 

Know who is doing the work in your portfolio...it is very unusual to be a capable hand-on rehabber, project manager of contractors, purchaser of materials, business manager and rental operator all at the same time. Every one of us has different skills and we have business relationships specifically to back fill the skills we are lacking (I keep an accountant because I'm a great property manager and real estate cowboy but not great at consistently balancing accounts). This is exacerbated when an owner is located out of town...make those relationships before you are holding a property.

Have a positive, pleasant attitude...successful vendors (myself especially) don't have to take on clients, we want to help people we enjoy interacting with and we want to hear from our team that our client is happy, successful and interacting reasonably and responsibly. There isn't enough money available for me to tolerate a client who is being nasty to the team. This is a very serious investment for you, we get that, work together with us to keep the asset well maintained and performing...see the warning on debt and leverage so you don't suffer undue fear and anxiety. 

Have a niche - what do you invest in that others don't, how do you differ in what you offer? If you don't have a reasonably firm strategy then you will suffer fear in being in the wrong niche and rapidly transition between investments...and transitions cost the most money in real estate! 

I advise being very careful with leverage...I have operated for a decade on a line of credit from my local bank and lived within that capability. The first four properties paid down the limit for the 5th, the 5 paid for the 6th, and rapidly I went from 1 purchase a year to 2 a year then 4 a year etc. The same annoyance at not being able to grow infinitely using infinite borrowed money translates to the lack of fear when bills come due or the market contracts. Keep cash on hand to go after deals and keep that cash to insulate you from fear when a bump in the road occurs.

Take it slow...nothing GOOD in real estate happens fast. Appreciation, rental income, equity, experience, relationships with vendors...it all takes time. You don't have to become independently wealthy over night...well, you won't :) You can definitely make bad decisions quickly if you aren't careful. 

I will edit this as more factors are identified, this is just my brain storm over coffee. :)