Real Estate Investing In Dayton, Ohio – Not Recommended

Today let’s look at what a duplex owner in Dayton, Ohio can do to improve their retirement. I’ve had a few conversations with Teri Lussier, a very good agent I know who lives and works there. She also sent me actual listings and records of sold properties. I wanted a middle-of-the-road, well maintained example, and I think I found one. It’s a duplex, and closed escrow about nine months ago in the 45414 zip code area. The price was $173,000.

It offered two bedroom units on each side, both of which sported fireplaces. It was very well maintained. The rents at the time of sale were $765 a side. Heck, it’s even at the end of a nice, quiet cul-de-sac. With forced air heat and central air, neither harsh Ohio summers or winters were gonna get the best of any tenant. Also, they’d given it the ‘once over’ before selling. Redone driveway, modernized windows, and the like.

Here’s a picture — the curb appeal is great.

Let’s create a scenario

Let’s say the sellers were about 48 or so. They’d paid off the original purchase loan. As almost all investors, the main goal was to enhance their retirement with the monthly cash flow. In their case it would currently be roughly $1,000 a month, possibly a bit more. They plan to retire no later than 65 — sooner if possible. They’re both third generation Ohioans and will remain there. Their home has been free and clear of debt for a couple years now. They can easily add $20-25,000 in cash to their net equity if it’ll make a significant impact on their retirement income and net worth.

What if . . .

. . . they execute a tax deferred (1031) exchange for three Texas duplexes? All of which are not only brand new, but in locations I’d let Mom collect rent from at midnight on Saturday — alone. Here’s how they’d break down.

Total purchase price just south of $760,000. Total GSI (Gross Scheduled Income) a steak dinner over $93,200 a year — $1,295 a side. The cash flow from Day 1 will be approximately $15,500 annually. In the 17 years they have till retirement, they can pay off all three duplexes — sooner if they choose to add a bit from their own disposable monthly cash. I used 5.5% interest on their loans. The Net Operating Income (NOI) came to a tad under $56,000 yearly.

Sooo — time for arms outstretched, hands palms up, while imitating a simple weight scale, which option is better?

First, let’s lay out their options.

1. Keep the duplex and retire with it free and clear.

2. Trade the duplex, tax deferred, for more Dayton area income property. (More on this option below.)

3. Trade the duplex for the Texas properties shown in the above example.

Option #1 leaves them with a debt free local duplex spinnin’ off $12-15,000 a year or so. It’ll also leave them with a property over a half century old. Yeah, that’s the ticket. Let’s retire with an ancient duplex so we can benefit from higher operating costs. NOT.

Option #2 is, in my opinion, a huge mistake. Let us not forget — Dayton is in Ohio. Unemployment is over 10%. Dayton? Both GM and NCR left the region. Ouch! If it wasn’t for the Military Base, the region would be in a serious world of hurt — and it’s fairly bad now. How bad? Try 30-40,000 vacant homes. Or portions of neighborhoods being razed to the ground. They’ve not only lost multiple major employers, thousands of residents have also voted with their feet. They’ve seen the region’s future, and decided to Get Outa Dodge.

In my professional opinion, Option #2 is something nobody should do to themselves on purpose.

Option #3 is exactly what I’d advise a duplex owner in San Diego to do. My ‘No-Brainer’ policy applies here. In a nutshell, that policy says a real estate investor should never make a major change to their status quo unless it’s an obvious no-brainer benefit to them.

Let’s look at the Texas economy.

Less unemployment than the nation as a whole. Rising, not falling rents. Business capital flowing in from not only the rest of the country, but from around the world. No state income tax. An incredibly pro business attitude from government at every level. Pro landlord. And the list goes on.

Ultimately though, it comes down to a couple things — listed here in order of importance.

1. Retirement income.

2. Net worth of real estate investment portfolio.

Trading to a region like Texas results in retirement income approaching $5,000 monthly — in this scenario roughly $56,000 a year. This assumes no rise in NOI — ever. It’ll be reliable too, which is, you know, something retirees seem to prefer. Who knew? Income 17 years from now in Dayton, Ohio? Are you willing to bet your retirement on the reliability of that income? Really? Not me.

Then there’s the end game net worth of their real estate investment portfolio. Trading to Texas finds them (sans appreciation of any kind, ever) with a net worth of over $750,000.

In other words, if you’re in Dayton, or any market reminding you of Dayton, Get Outa Dodge. Keep repeating to yourself, “Option #3 . . . Option #3 . . . Option #3.

All kidding aside, trusting in Dayton, Ohio income property for something as important as your retirement is an extremely poor risk, which may be the understatement of the year. Give yourself the best of both worlds — retire in Ohio with steady, reliable income from property located in a far superior economic atmosphere. There are Ohio couples who’ve already postponed their retirement due to poor investment performance.

Why would you put yourself in their shoes on purpose?

Here’s something you can do on purpose — gimme a call at 619 889-7100. A reliable, magnificently abundant retirement can be yours — if you have a Purposeful Plan. Have a good one.

Related posts:

1. Purposeful Planning And Tax Shelter For Real Estate Investing
2. Low On Cash? High On Real Estate Investing? You’re Gonna Like This
3. The Costs Of Real Estate Investing Are High These Days — Get Over It
4. Durango, San Diego, Texas, KC — Random Thoughts On Real Estate Investing
5. The Answer To the ‘Drive-By’ Real Estate Investors