This is the second post in my series on investing in Dayton real estate during 2021 and 2022. My last article provided an overview of the topics that I will be addressing over my next several posts. In 2019 I wrote an article that discussed the income and return from my Dayton property investments. At the time I purchased my first rental property in the area, I was able to rent it out for 1.25% of the purchase price, higher than the 1% threshold that is typical for investors to seek. This article, as well as the video below, provides an update on how the properties I had at the time of my prior article, and ones I have acquired since, are performing as of 2021. Contact me today to speak with a real estate agent if you are interested in purchasing or selling an investment property.
My Dayton real estate investments have appreciated by roughly 69% during my time in the market
In 2015, I moved back to Dayton from the west coast and purchased a residence (which I have since turned into a rental). I purchased my first rental property in 2016 for $58,000. It was a turnkey property that I was able to rent out days after closing, which made it even more appealing to me as an investor. In 2016, I set the rent at $675 per month and it had risen to $715 per month when I wrote the prior article mentioned above. I had also purchased two additional properties prior to my previous article.
In early 2020 I put roughly $7,000 into my initial rental property in the form of new carpet, fresh paint and countertops, and other aspects that help to keep the property fresh, reduce wear and tear, and get it ready for the next tenant. That means that with the purchase price of the property, plus what I have invested in its upkeep, I have put $65,000 in the unit. Today, the rent for the property is $925 per month. That puts the monthly rent at 1.42% of the investment total, a significant increase from where it was in 2019.
In addition to monthly cash flow, my initial rental has also appreciated since I purchased it. As stated above, I have put roughly $65,000 in the property between the purchase price and upgrades. Today, I would not list it for sale for less than $110,000. So, on top of the income from the rent, the property itself is likely worth $45,000 more than I have invested.
Today, I own a total of five rental properties in the Dayton area. This is two more than at the time of my prior article. I am quite happy with the appreciation that has taken place on these properties. When you combine the purchase price of all of my rentals, as well as the money that I have invested in maintenance and upkeep, the value is likely 69% or so higher than what I have put in.
Obviously, property value appreciation is only one part of the equation. All of my units are rented out for a positive cash flow. When that cash flow is added to the roughly 69% return mentioned above, then my total ROI becomes something that I am quite happy with.
I have not had an issue finding qualified renters in the Dayton area
I have been asked about my rent prices and my renter qualifications and how that may affect the ability to find a qualified renter in Dayton. Many landlords worry that raising rental prices, to keep up with the market, or setting a high threshold for renters may reduce the number of inquiries for the property.
I have what many landlords may consider to be a “high” requirement structure for my rental properties. These minimum requirements include:
- 600 FICO score
- Income that is at least 3x the rent amount
- No felonies or violent misdemeanors
- No bankruptcies, foreclosures, or evictions in the past two years
While other landlords often ask if my criteria is too strict, or set their rental threshold lower, the truth is that each time I have had a vacancy in one of my properties I receive numerous applications in quick order. No home has ever been on the market for more than a few days without a new tenant lined up.
Why I am continuing to invest in the Dayton area
While the value of homes and the cost of rent in the Dayton area has risen since my first investment in 2016, it is my intention to continue investing in the area. It is my personal opinion that that the market will continue to improve. I base this personal opinion on what I see as our area’s competitive advantage over other real estate markets.
Some real estate markets have advantages which can wane over time. For example, as I mentioned in this article on Dayton’s competitive real estate advantage, a North Dakota town saw a boom from its oil production and home prices subsequently declined as energy prices dropped. Dayton, however, has a unique characteristic – its geographic location. Geography was one of the key factors in my decision to invest in our area.
Roughly sixty percent of the U.S. population resides within five hundred miles of Ohio. When you consider that several major highways (such as the 70 and 75) converge or go through Dayton, our city becomes a likely choice for many ecommerce companies to open distribution centers or other logistical operations. This advantage is not one that will change and cannot be replicated by other areas. It’s a durable advantage that lasts and improves more over time due to an increase in the shipping and logistics industries.
The shipping and logistics industry is continuing to see rapid growth in Dayton as ecommerce has led to more companies wanting to make our city “home base.” In fact, in only the first quarter of 2021 alone, eCommerce has grown 39 percent and has hit $4.2T[1] nationwide. This economic boom also contributes to job growth; eight different companies alone have added 2,700 jobs in the Dayton area[2], and other new industries are building up in the city’s pipeline. For example, Pak-Rite Industries, a packaging solutions company, has leased a 600,000 square foot building in our area[3], and Amazon is slated to open a new fulfillment center that will create 1,500 jobs[4]. Outside of the logistics and transportation developments, our city provides a focus for tech talent, coming in at number one for tech talent growth in the nation in 2021[5].
If you are interested in investing in the Dayton area, then contact me today to speak with a realtor. I pride myself on providing quality service and I look forward to speaking with you.
I also service the areas of Beavercreek, Centerville, Cincinnati, Clayton, Englewood, Oakwood, Fairborn, Harrison Township, Huber Heights, Kettering, Miami Township, Miamisburg, Riverside, Springboro, Trotwood, Vandalia, Washington Township, West Carrollton, and Xenia.
Note & Disclaimer: Nothing in this article, or on this website, should be construed as investment or financial advice. The opinions shared on this website are the personal, and not professional, opinion of the author and are not associated with Keller Williams Advisors. Any investment decisions should be made after consulting with a certified financial/investment professional.
References:
[1] Global E-Commerce Sales To Hit $4.2 Trillion As Online Surge Continues, Adobe Reports – accessed at: https://www.forbes.com/sites/joanverdon/2021/04/27/global-ecommerce-sales-to-hit-42-trillion-as-online-surge-continues-adobe-reports/?sh=21de9c9250fd
[2] How the area around the Dayton airport became a hub for distribution jobs – accessed at: https://www.daytondailynews.com/local/2700-jobs-around-airport-area-and-growing-how-it-became-a-hub-for-distribution-jobs/OBCER7QUIBHIHN26WXGMQB77C4/?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_2604639
[3] Michigan company chooses Dayton region for largest-ever expansion, 300 new jobs – accessed at: https://www.bizjournals.com/dayton/news/2021/08/23/pak-rite-industries.html?utm_source=st&utm_medium=en&utm_campaign=bn&utm_content=dy&ana=e_dy_bn&j=24830657&senddate=2021-08-23
[4] New Amazon fulfillment center to bring 1,500 area jobs – accessed at: https://www.dayton.com/what-to-know/amazon-to-open-fulfillment-center-in-union-in-2022/QW5QPRI675G4RGGJVQFIQGUEAI/
[5] New report ranks Dayton the No. 1 city for tech talent growth – accessed at: https://www.bizjournals.com/dayton/news/2021/07/18/dayton-tech-talent-growth.html?utm_source=st&utm_medium=en&utm_campaign=me&utm_content=dy&ana=e_dy_me&j=24488874&senddate=2021-07-19