In 2020 we believe that income property in Dayton, OH stands the greatest chance for stable rent growth and moderate appreciation. There are a myriad of reasons for why your should invest in Ohio in 2020. Many would-be investors are likely going to doubt if they should invest in real estate after COVID-19 and reconsider their investment strategy. They will miss many opportunities by doubting themselves.
Investments in the Dayton, Ohio area are literally hidden gems. The “Gem City” is full of investment opportunities that easily meet the 1% rule that many cash flow investors seek. When buying investment real estate properties in Dayton it is important to remember the fundamentals of what makes an attractive investment.
Having a strong investment thesis is paramount for determining what makes a profitable real estate investment. You will want to consider the neighborhood and your target return on investment (ROI) for the price you are willing to pay.
Which City/Markets Are Best For Real Estate Investing In 2020?
The Dayton market boasts strong rental demand mostly because of the huge air force base, associated manufacturers, military contracts, and two large universities. This isn’t to say that Dayton’s real estate market is totally recession-proof, but it does have a diversified base of industries whose goods and services are not cyclical or generally affected by the broader economy. This is good news for Dayton real estate investors.
About 140,000 people call Dayton, Ohio home, making it the sixth-largest city in Ohio. The 800,000 people in metro Dayton makes the MSA the fourth largest in the state and roughly 60th in the United States. The market is primed for investment with a healthy mix of economic activity bringing a steady supply of renters to the region.
What makes Dayton, OH unique is its strong real estate fundamentals for investors focused on cash flow. Dayton has some of the best rent-to-value ratios in the country. The minimum rent-to-value you should look for in an investment property is 1%. This can easily be reached in many Dayton neighborhoods, and in some areas, you can approach 1.5-2%. This is mostly because of the low cost to entry for Dayton real estate.
Remember, the best places to buy cash flow rental property will have strong job growth, which fuels strong population growth but where real estate is still affordable. As mentioned above, this investing trifecta is more commonly found in the midwest, and Dayton, OH is a poster child for a profitable market. The median home price in Dayton, OH is just over $68,000. That’s remarkable for a city that boats average rents at $900+. Those numbers make cash flow inevitable.
The economic vibrancy in Dayton Oh could not be more understated. The local economy does have some financial headquarters but the dominance of factories and military leads to an environment that is blue-collar and stable instead of attention-seeking and somewhat volatile as can be found in major markets. Dayton, like Columbus, functions as a regional center that allows it to reach beyond its humble roots.
Again, the Wright-Patterson Air Force Base is a major resource to the economy. It is a massive employer as approximately 20,000 of the 30,000+ workers there are civilians, ie they are not actively in the military. This means that investors can expect stable employment, good salaries, and not much risk of losing employees due to layoffs or relocation.
To that end, the Dayton and Cincinnati metros are ever approaching one another. It’s predicted that by 2040, the two metros will merge and grow to a size similar to San Diego. Combine this growth with a healthy rental yield and you have one of the healthiest rental real estate markets in America.
So where in Dayton are good real estate investment opportunities?
A “good” real estate investment depends on your investment goals. But, in general, the median home price should be supported by the median rental rate. The higher the median rental rate in relation to the housing cost, the greater the rental yield…going back to the 1% rule.
There are many popular neighborhoods throughout metro Dayton that are worth consideration:
- Grafton Hills: This is on the higher end of the spectrum. Some may feel that the properties there are too high end to be rental property even though prices are affordable.
- Kettering: A semi-suburban area with excellent housing stock and amenities
- Most properties within Dayton city limits: Many would describe most of Dayton as C or C- property. This area has a lot of nice, smaller houses as well as a mix of B- and C or C+ grade neighborhoods. Homes in this area have begun to increase in value above the threshold for banks to begin lending.
- Many are free of any leverage meaning that prices are poised to skyrocket as values increase a property becomes bankable.
Ultimately, ROI is the key to a successful real estate investment in Dayton OH. The market is best suited for those that like the boring, vanilla midwest landscape. Dayton typically does not see large swings in rent rates or property values. Instead, the market delivers consistent, slow and steady appreciation over the long term.
Risks of Investing in the Midwest
Out of State Investing in Dayton, Ohio
Of course, not everyone that wants to invest in a market like Dayton wants to live in a market like Dayton. And that’s ok! In fact, many successful investors invest in markets different from where they choose to live. The key is having a strong team and clear investment objectives.
One of the best investments you can make is in real estate education if you haven’t already. It will help you gain clarity and avoid some of the headaches novice investors face along the way.
The landlord-friendly laws of Ohio can only take you so far. You will need strong local legal representation and a good property management firm if you decide that property management is not for you.
Not having a clear plan
Planning your investment strategy is imperative for investing in the midwest or anywhere for that matter! You will need to stay hyper-focused on your objectives. Do you want to purchase properties turn-key, or fixer-uppers to capture some equity for yourself? Are you willing to continually improve the property over time or would you like to prefer to unlock its maximum value immediately? These are all things that are imperative to consider before buying an investment property in the midwest.