All Forum Posts by: Jonah Slove

@Michael P. Nope, I am down to one house in that zip code!

When you can sell a 43608 and buy 75% of a 43612 with 75% of the income but enjoy a higher class of residents with double the rental demand it's a solid strategy.

I wouldn't say 43608 (or 43605 / 43609 and a few others) doesn't make money...it's that your portfolio of ten properties runs about a 40% chance of any property being rented for 8 months, requires an eviction and full rehab (the bane of realized income). A game of wack-a-mole.

The more stable areas (a solid B vs a C-) experience for more engagement by the residents to want to stay in their home since they are reasonably hard to find and qualify for.

Hope you are doing well my friend!

@Dave Dumoulin Hey thank you for focusing on Toledo Dave!

Defining the class of the neighborhoods is the tough one to start that grade C out for...I have some clients unused to the mid-west who are used to high-end suburbs who consider our better areas a B- area.

Personally, I classify the C- anything I verify I have easy access to my spare magazine before I enter a vacant property. B grade property walks are attended by my children to run around and tell me which bedrooms they would pick if it was their home.

43605, 43608, 43609 are the popular zipcodes for bottom-budget value purchases...I manage a ton in these areas and my personal portfolio contained over 40 43608 properties at the peak. 

20% of these properties will be crazy money earners, 20% will be astounding money pits, and 60% will fare average.

I have evolved into the nicer 43612/43613 for my personal portfolio and find the properties earn consistently and far smoother than my 43608 houses. ($80k renting for $1200 vs $40k renting for $800 multiplied by the ratio above vs boring consistency of the nicer area) 

Oh and I have zero excitement for apartments. I have been investing in Toledo, OH since 2009 and owned 2-12 unit buildings and find they are way too hyped (read lots of guys from BP want to pay too much for them) and the reality is residents in Toledo are ultimately seeking a house with a yard and a garage so as soon as a resident improves their financial situation they move into a house. Additionally Section 8 owns a ton of apartment complexes so there is aggressive competition when compared to the single family vouchers that are very commonly available to us small-time housing providers.

Love to talk Toledo, again thank you for the interest!

https://www.toledoblade.com/opinion/editorials/2023/12/12/ed...

(Text of article posted below)

It's nice to see Toledo made the national scene...Realtor.com Forecast of 2024 Top Housing Markets - Toledo #1

Well, Realtor.com is more bullish on our coming real estate year than I am. I anticipated a strong but stagnant year for growth (Typical Toledo, right? We lag the market's highs and lows, just plodding along with consistent returns.)

I have agree with the author that Toledo real estate is priced very competitively nationally and our rental returns exceed the 1% rule frequently. I spent 2022/2023 purchasing single family homes in my preferred investment corridor within 43612/43613 zipcodes. $80k will net you $1200/mo.

That said I am of the opinion that rent rates (up significantly since Covid) are plateauing, I don't expect to see them climb significantly higher.

Regardless, factor my position of being a cash-in-hand personality who doesn't much care if the hype is telling us to buy-buy-buy or run for the hills. I invest where it makes cents and the news either validates me (yeah!) or doesn't (like the talking heads know the future).

I look forward to a stable year in 2024, with growth according to the article below!

DEC 12, 2023

Good news for Greater Toledo homeowners and all concerned with prosperity here comes from Realtor.com’s forecast for 2024.

Economists for the largest online real estate website predict Toledo will be the hottest home market in the nation next year.

Affordability and stability are behind the Realtor.com projection of 8.3 percent price gain for Toledo homes in 2024. Toledo’s median home list price of $200,000 is less than half the national average while price volatility has been muted compared to the wild fluctuations in much of the country. The real estate website expects Toledo home sales to increase by 14 percent next year, because the lure of low-cost housing has sparked a surge of buyers.

Both buyers looking for a place to live and investors planning to renovate and rent find Toledo attractive, according to the real estate website. The hot-housing markets, according to Realtor.com, include Los Angeles and San Diego where median home prices top a million dollars and Grand Rapids, Mich.; Rochester, N.Y., and Springfield, Mass., where prices are much lower but still well above Toledo.

The significant boost in pay won by United Auto Workers members at Stellantis and General Motors in Toledo and rippling out into the auto-manufacturing supply chain boosts buying power in the local economy and is surely behind the economic projections of real estate sales growth exceeding all but one of the top 10 markets. Even if California will not relent on adjusting emission control standards, and the more than 1,000 supplemental workers at the Stellantis Toledo Jeep plant who are expected to rise to full-time permanent status are laid off, on balance, local incomes are rising.

For the vast majority of individuals, a home is the largest single investment of a lifetime. The financial net worth of residents who own a home is much higher than those who do not. In many locations, including some of the other hot-housing market cities, appreciation has made homes unaffordable to those who don’t own a house they can sell for the funds needed to make a move. Toledo housing is affordable to a much higher percentage of the work force than the average city. This fact will help every employer in the region keep and attract the employees needed to make them successful.

The Realtor.com analysis of Toledo notes that we’ve seen our “share of troubles over the past few decades,” but the real estate market has remained resilient with good options in the city and the suburbs. This assessment is another powerful lure to attract people and investment dollars. Declining local economies invariably hurt home values. Resilient real estate markets are safe for investment, and it’s tremendously important that Toledo keep that label through policies like the proposed lead law that match standards in nearby suburbs and comparable Ohio cities.

Toledo is the only Ohio city in the hot-housing market top 10, and Grand Rapids is the only Michigan location on the list. The attention is invaluable to Toledo, and the analysis is reassuring to local homeowners and potential buyers and a great benefit to local economic development.

City leaders must work diligently to take advantage of the positive notice and make reality match the prediction.

I will give it a look 

Quote from @Jonah Slove:

Quote from @Andrew Postell:

@Jonah Slove tell her to look into capital gains taxes and how much she can exclude if she lived in it for 2 out of the past 5 years.  Renting a $1.3million home is a terrible return.  She can certainly do better with other properties. 

 We can exclude $500k of gains if we are married. Once fees and improvements are taken off too we should be maximizing that. So what are your thoughts on our scenario? She moved in with me 2 years ago and before the property in question was her primary.

 Just a caveat here. If you exclude the majority of your capital gains via the two out of the five-year exemption, then there's no need to do a 1031. I assume you have some repairs that will knock the basis down in the property from 1.3 to maybe close to a million and then you have the $500,000 in capital gains exemption. So you should be good to sell outright. You can then dump that money into rentals which will cash flow. You could even buy properties out riding cash with that much dry powder. That's what I would be doing if I was in your situation.

From a numbers standpoint, the highest use of this capital is to sell and buy another investment, or even just invest in the markets. Even if she just pays the capital gains tax - likely 15%-16% effective unless she has a very high income - it shouldn't be very hard to beat the return she is getting on that true equity. 1031 is not even necessary to justify selling. Here's the quick math:

$1,300,000 (Sale Price) - $130,000 (Sales costs 10% of sale price conservatively) = $1,170,000 net

$1,170,000 (net sale proceeds) - $550,000 (cost basis assuming no improvements) = $620,000 Capital Gains

$620,000 (Gross Cap Gains) - $250,000 (Cap Gains waived for primary res) = $370,000 taxable cap gains

$370,000 x 0.15 = $55,500 cap gains taxes owed

$620,000 (capital gains not including original equity in the home from downpayment and principal payments over 5 years) - $55,500 (cap gains tax) = $565,000 

That $565,000 number is the apples to apples number that you want to make sure you're getting the best return you can from. $2,500 monthly rent (not subtracting monthly expenses and mortgage payments yet) is $30,000 annually which is 5.3% return. Assuming at least 50% of the rent is going to expenses and mortgage payment, now she's making 2.65% on her money. She can get that in a high yield savings account. No hassle, 100% liquid.

Now factor in the equity she had at the beginning, the option of using a 1031 exchange, and intelligently investing the proceeds and there is a TON of room to improve the return on this capital!

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4351 N Christine St. Boise, ID 83704Prime Boise
Great Location for STR or Primary Residence and Appreciation
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𝗧𝗘𝗥𝗠𝗦 :
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