All Forum Posts by: Gordon Starr

Hi BP!

I have been growing my portfolio of six houses and a duplex by around one house per year and I like to deal in cash with no mortgage. Problem is, I am a bit short on ready cash to continue growing. This forces me to sell (which I didn't really want to do). I have chosen a sell one, buy two strategy where I sell one of the more valuable houses and buy two houses that need rehab or a duplex needing rehab. Because I do most of my own rehabbing, my tax basis in these places is very low, so I am up against a serious tax burden when I sell.

I would love to hear from folks who have experience with the 1031 exchange. I have the sale set with my tenants buying that will net me 37k and want to purchase a duplex needing work for 24k. I could easily use up all the 37k (and maybe more) proceeds in the rehab of the duplex. Most of the info I have read does mention you can include rehab costs in the 1031 exchange. Sounds great, but reading about it and doing it are two different things.. Has anyone tried this? Thanks in advance for your input.

Gordon

The rental demand is partly due to the enormous air force base, its many specialty manufacturers and military contracts, its two big universities and the slow resurrection of the auto industry which was devastated by the shuttering of GM at the crash time (I think it was 2007).

The north side of town has the best housing stock in my view. And the west side has the highest murder rate. Look at North Riverdale, grafton hill (C), or kettering (B) for the best housing stock for low money. How low? In North Riverdale (C) last year I bought a duplex for $14,000 including closing costs. Added about another 15k and some significant sweat and she now rents for $1,600 plus utilities.

Keep this in mind if you buy government repos (HUD, Fanny, Freddie, city, county) in Dayton - when they go through the sheriff's sale, the county foreclosure process does some of the best title work anywhere.

My approach was to buy into a neighborhood in Dayton, Ohio that had a lot of vacancies and low rents, but first researched the area and found one that the city planners had in their sites set for rejuvenation. The city had big money for demolitions and I worked closely with them (and bought two houses off of them) to investigate the vacancies. I ended up buying everything I could along a particular street that would be when fixed up and once was very beautiful. The houses were built in the 1950s and 1960s with far superior construction standards than are common today. I made these places really nice by polishing, painting, repairs, and landscaping. I then charged well above market rates which priced out section 8 and others. Its really amazing how much the north riverdale area has improved. Along this 6 block street, Kathleen ave, the city has torn down five houses and I have rehabbed and rent out three more. The rents in the area are up 40 percent over the last five years and a lot of other investors are now buying! I am not interested in selling, but if I were, the returns would go from over 25% to something astronomical.

Really key to success is

1 - make them distinguished (beautiful retro look in my case)

2 - tenant screening - get people with jobs who can afford the rent and actually want to buy the place

3 - choose your neighborhood wisely.

4 - buy houses in close proximity so you can keep an eye on them, but also so you can improve the neighborhood over time by your own work!

5 - good luck! you may be needing it

Hi All,

I've been buying single family houses and duplexes in the north riverdale neighborhood of Dayton, OH. I am highly localized along Riverside drive over to Kathleen ave in 45405. There were a lot of vacancies and some abandoned properties needing demolition back in 2012 when I started. The city demolished much of the less than worthless housing stock and recently someone bought up virtually everything from the MLS and the prices have doubled and rents are up 20%! So, I am not finding any killer deals like I used to! Not to complain, it is really a sweet win for most everyone around there except for squatters!

My question is how to continue with my expansion.. Do I borrow on my newfound equity (I carry no debt at present) and keep on buying despite the higher prices? How can you find/predict where these type of transitions will be occurring and buy into another area at rock bottom? Has anyone else had this experience and could share what has been happening?

Thanks!

I am heavily focused in Dayton, OH and seeing a lot of opportunity - and a lot of new investor activity. The diverse economy has been on a steady slow rebound after GM shuttered up and devastated the real estate market in the great recession. If you are in an area where the prices are under 50k (much of Dayton proper), the banks aren't buying in and it is almost ALL investors buying. I love the well built smaller-home areas such as north riverdale 45405. These were built up by super well paid manufacturing workers. They are selling for a song considering the income stream and rent very well when polished and in good repair. It doesn't need to be new to appeal.. clean and solid works just as well, maybe better. Look for where the city is targeting its massive demolition budget and just wait till it gets back over 50k. Then, the owner occupants come back in the market :)

Hi, When I left government work I cashed out around 100k from that 401k. With that I bought and rehabbed five houses in Dayton OH. I didn't pay the taxes right away.  The installment tax payment plan is lower interest than most places you can turn to fund an operation like that. From that investment, I net around 2,000 per month from rent as a conservative approximation and I could turn it over to a management company and retire. But, I am not retired and continue to expand. Part of that is the dirt cheap houses you can buy in Dayton, of course. As a retirement investment, I really like the tangible house asset rather than the blip on a screen that says you will have money if you retire. Also, I like getting paid now rather than when I retire.