Cincinnati Realtor Assisting Real Estate Investors
Purchasing a property as an investment is a great way to create income and generate equity. The process, however, can be confusing and overwhelming. There are a number of factors to consider when you begin the process of investing in a property. You need a real estate agent who understands these factors and considerations. In addition to being a Cincinnati realtor, Mary Beth Downing is an investor herself. This means she understands the needs of those hoping to buy and sell investment properties. This is why Mary Beth’s primary focus is helping other investors buy and sell properties in southwest Ohio. Contact us today to get started.
Investing in Cincinnati Multifamily Units
Purchasing a multifamily property (such as an apartment building or a duplex) allows one to scale the return received on their investment dollars. This potential growth comes from the fact that multifamily units allow an investor to utilize the property for more tenants than a single-family home. Purchasing a multifamily property can also give buyers the option to live in the unit, as well, doubling as investment property for income generation and as a primary dwelling. In general, multifamily units give buyers the advantage of economies of scale.
In addition to cash flow and income generation, purchasing a multifamily home also comes with additional benefits. These include mitigating the risk of vacancy. With more than one tenant in a building, it’s less likely that you’ll have zero occupancy. You’ll also face more simplicity in terms of loans and insurance. You’ll manage one loan and one insurance policy as opposed to having multiple loans and policies for multiple single family rentals. This streamlines the process for the property owner.
Mary Beth Downing focuses on working with investors and has helped with the purchase of many multifamily properties. She will take the time to learn about your goals and will devise a strategy to help you meet those goals. This will include helping you find the right properties, gaining the information necessary for determining whether the property will yield a meaningful cash flow, and helping you through the buying process. She will also give you her assessment of rental trends in the area, the condition of the property, and more. Mary Beth also has relationships with contractors and inspectors. This means that if you are investing in Cincinnati from out of state then she is able to connect you with the people you will need.
Connect with Mary Beth to get started in the process of finding your next investment property today. We also assist with properties in Fairfield, Springdale, Sharonville, West Chester, Hamilton, Monroe, and Middletown.
Investing in Single-Family Homes
Different from investing in multifamily properties, single-family homes have their own set of benefits. These benefits include the fact that residents may be more likely to stay long-term, the fact that rents are typically higher for a house than for a single apartment unit, and that the property may be easier to resell at a future date. It will be important to find the right property. That means finding a home that is undervalued in terms of price and has the features needed for renters along with being “turnkey” ready. Likewise, it may be possible to find a “fixer upper” where the cost of the purchase price, plus repairs, will be justified by the home’s final value. Single family properties are how most new real estate investors get started.
Cincinnati has seen a resurgence in recent years. This resurgence is leading to more people in need of houses. This need has led to opportunity in terms of move-in ready rentals, distressed properties, and foreclosures. It is important that you work with a real estate agent who has experience in dealing with single family investors.
As mentioned above, Mary Beth owns several investment properties in addition to being a real estate agent who focuses on working with investors. When viewing a property, Mary Beth will give you an honest assessment of rents in the area as well as comparable purchase prices. She will be with you while making your offer, she will handle your contract from beginning to end and will guide you through the inspection process. If the home is currently rented out by another investor owner, then Mary Beth will secure copies of any leases, repair records, and other documentation relevant to your decision. We understand that this is a time of opportunity for you. We are here to help.
Frequently Asked Questions for Cincinnati Investors
Below are frequently asked questions that I receive in regards to investing in Cincinnati’s real estate market. Click on a question to be taken to the answer.
How does investing in a rental property work?
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Many who are looking to begin buying rental properties are not sure as to how the process works in relation to buying a residential home. Regardless of whether you are buying a single family residence, a duplex, or an apartment building, there are certain steps which you will take.
First, you’ll need to secure financing, which typically comes in the form of a mortgage for those not paying cash. There are some key differences between a residential and an investment mortgage. First, interest rates are typically higher for investment properties and, depending on your situation, verification of your income by the lender may be more of a task. Other things to consider, when it comes to financing, include:
- FHA loans may typically not be used for single-family investment homes. This is due to the fact that FHA loans are given to those who will be living in the residence. A possible way to use FHA financing to secure a rental property is if one is going to also live on the premises. This would mean that FHA financing may be available for one purchasing a duplex, or apartment building, with the intention of living in one of the units. If you are purchasing a single-family investment, then you will typically need to utilize a conventional loan, which will require a larger down payment.
- If you are self-employed and have other rental properties, then you will typically need to provide proof of your income in the form of profit and loss statements in addition to your tax returns. Additionally, lenders will often request copies of leases, rental financials, and insurance policies for your existing investment properties.
Once you have secured financing then you may put in an offer on a property. The goal of most investors is to use the rental cash flow, from the property, to pay the mortgage. While an investor is responsible for paying taxes on rental profits, rents are often partially offset by the ability to deduct depreciation against the property. This is one of multiple reasons why many see owning investment real estate as being tax advantageous.
After an initial rental property appreciates, or has seen its mortgage balance drastically paid down, investors may then choose to borrow against the property to purchase additional units.
How do I start investing in rental properties?
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The first step towards investing in rental properties is to make four decisions. These include:
- Choosing the type of property one wishes to purchase – Determine if you are looking for a single or multi family property. It’s important to note that any property with 5+ units is considered a commercial property. A commercial property will require the investor to secure a commercial mortgage, while structures with four units or less may be purchased through a residential loan.
- Selecting a location in which to invest – This requires researching a market area, its economy, rental trends, etc.
- Selecting a class of property to invest in – Investors typically classify properties into four classes –A, B, C or D. Each property class speaks to its level of risk and return. Class A properties are typically newer, of higher quality in terms of construction, and are in highly sought after locations. Class B properties are one step down and may be a bit older or require additional maintenance, but are still viewed as a valuable investment with quality tenants. B class tenants are more likely to be salaried employees with solid credit scores. Class C properties are typically in less desirable areas and are in need of more repair. C class tenants will typically have more average credit scores, and may be hourly employees. D class properties may be located in high crime and economically depressed areas. A D class property may appeal to an investor who wishes to work with Section 8 and other subsidy programs that guarantee rent and may pay higher than market value rates.
- Determining how much you can afford to invest and your target property price point – While it may sound surprising, many new investors begin looking at properties without first considering what they can and cannot afford to purchase. It can be advisable to have the dollars and cents aspect determined before looking at properties. This can help an investor to narrow their perspective list beforehand and to prevent them from wasting time by looking at properties which they would eventually not purchase.
Knowing these important things before you start looking is vital in making moves in the right direction and finding the best property for your goals, especially in a market that is experiencing quick sales which Cincinnati is at this time.
Is Cincinnati a good place to invest in real estate?
Cincinnati is an improving metro area. This means more job opportunities, and potentially a higher demand for real estate–both in terms of purchases and rentals. Some of the improvement is due to how the growth of ecommerce plays to Cincinnati’s geographic advantages. The location of the Cincinnati/Northern Kentucky Airport, Interstate 75, and the city’s proximity to the Ohio River, make it a prime location for distribution. This is why, for example, Amazon has been investing in a nearby $1.5 billion facility which is expected to employ roughly 2,000 people. This is just one example of job growth in the area.
Many would also consider Cincinnati as providing affordable housing and investment opportunities, especially when compared to coastal cities and states. Many would consider the combination of jobs and low cost of living to be a good formula for investment. Mary Beth’s business is primarily focused on helping investors and we work with a number of people putting money to work in southwest Ohio.
What kind of industry does Cincinnati have? Is the economy stable?
Cincinnati is increasingly becoming a hub for ecommerce due to its geographic location and other advantages. In addition to the coming large presence of Amazon, mentioned above, the city is where large companies such as Kroger, Proctor & Gamble, and others are headquartered. But in addition to that, Cincinnati has a diversified economic landscape in terms of industry. This economy also has strong focuses in retail trade, insurance and finance, education and health services, government, and transportation.
Because of this diversified economy and continued growth, Market Insiders have commented on the strength of the Cincinnati economy, noting that “Ohio’s stable economy and business-friendly environment…make Ohio a great place to live and do business.” Investing in an area that has optimistic job outlooks, a diversified economy and reasonable property prices makes Cincinnati attractive to investors and Mary Beth is ready to help you find the best property to meet your needs.
What are rents like in Cincinnati?
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Rental prices are crucial when determining which potential property to purchase. While rents in Cincinnati are typically below the national average, housing prices are as well. According to homes.com, Ohio’s median housing price was $148,200 in July of 2021. According to the Cincinnati Business Courier, median rents were $1,149 in May of 2021. The Business Courier also reported that rents rose 11.9 percent from May of 2020 to May of 2021. This is indicative of increasing rental demand.
Is it better to buy a Single-Family or multifamily property?
This all depends on your preferences, your goals, resources, and your experience as an investor. Many investors choose to dip their foot in the water with a single family home as it presents fewer managerial challenges. However, a multifamily property may present a better return on investment.
Single-family homes tend to be less risky for a first time investor because it keeps the scale of the property maintenance within a manageable range. Investing in a single family property means that you, as a landlord, are only overseeing one tenant, one furnace, one water heater, one electric panel, etc. The dollar amount of possible maintenance costs can be limited and the learning curve is flattened because of this. There is also often less competition for small, single-family homes, and an investor might be able to get a better ‘deal’, on a property this way. This also potentially gives a first time property investor an opportunity to grow at scale and leverage the property to purchase more down the road. The downside to this may be that the profit margins for a single-family home can be tighter, and if a tenant moves out the property, then it is 100% vacant and income takes a steep fall to $0 until you find another occupant.
On the flip side, multifamily properties often offer more cash flow, are rarely 100% vacant, and provide the opportunity to raise rents at different times. While all of these benefits are certainly attractive, managing a property of this size and complexity can prove to be challenging if you are not a seasoned investor. When purchasing an apartment building or duplex, it will be crucial that you have maintenance people available, that you have a plan for maintaining common areas, and that you manage the property correctly.
How do I buy a multifamily property in Cincinnati?
The first step in buying an investment property begins with obtaining a preapproval letter from a lender (assuming that you are not paying cash). This pre-approval is not a guarantee that you will get a loan. Instead, it represents a lender indicating that you are likely to be able to obtain a mortgage. This pre-approval will serve as your proof of funds, which will allow you to place an offer on a property.
The next step in buying a Cincinnati area multifamily property is preparation. First, you want to determine location. It’s important to research the rents in certain areas of the metropolitan area as well as the desirability of that area. After that, you will want to determine how much you are prepared to invest and what type of property you can secure with that dollar amount. The amount you are able to spend will largely depend on the amount of cash you have available and the amount of your pre-approval letter.
After you determine the location and price point that you are interested in, it’s time to start looking at available properties with a real estate agent. When looking at properties, you will want to consider a number of factors. These include:
- Rent Roll – The rent roll is a list of all of the units in the property and the amount that each is currently renting for. This will give you an idea of the gross revenue you can expect the investment to generate on a monthly basis. Also, you will want to obtain copies of leases, you will want to ensure that the rent is current on all units, and you will want a record of any security deposits that have been paid by the tenants.
- Utilities – It’s important to know what the approximate utility costs may be per tenant and determine which, if any, utilities you want to include in the rent.
- Maintenance Issues – It will be crucial to identify the work that the units need as well as work that has already been done. These will factor into your analysis of whether purchasing the property is a good decision; you will want to make sure you are subtracting repair costs from your potential income. This creates a more realistic view of potential cash flow and helps you anticipate needed repairs. We have experience in discussing needed repairs with building inspectors and will work to make sure that you understand how repair costs may impact your bottom line.
How do I get a loan for a multifamily property?
The type of loan required to purchase a multifamily property will depend on the nature of the purchase. Properties with four units or less (such as duplexes or four-unit apartment buildings) are considered residential in nature. This means that the process of obtaining a loan for such a property is the same as for a single family residence. Properties with five or more units will require a commercial loan, which is a different process.
If you are a new investor and plan to live in one of the units, you have access to a Federal Housing Authority (FHA) Loan or a Veterans’ Affairs (VA) loan, if you are a veteran. For the reasons explained above, these types of loans can be used for anything with two to four units.
In addition to different types of loans, the requirements for securing financing for a multifamily property vary. Income verification for an investment property is often more complicated than for obtaining a residential mortgage. If the borrower is self-employed then the lender will request profit and loss statements, business records, and more. If the borrower owns additional properties then information will be requested in regards to those properties as well. If the borrower is taking out a commercial loan, then the lender will look deeper into the property being purchased. Documents requested may include copies of leases, profit and loss statements, bank statements, business tax returns and more. The process can be complex. As a real estate agent who is also an investor, Mary Beth Downing has been through this process many times. She will be in regular communication with you to help you obtain any documentation, regarding the property, that you need.
When buying a multifamily property, what do I need to look for?
At first glance, some may think that investing seems simple. You purchase a property at a great price and rent it out. However, as you are looking for a property, you should really be focused on some particular aspects in order to ensure that you will be setting yourself up for the best chance of success. Consider things such as:
- Property expenses
What will it cost to manage this property? This can include anything from utilities and outdoor lawn care and snow removal to understanding the average property taxes in the location where you are looking. In addition, if you need to hire a property manager to help you with the property, expect that to cost about 8-10% of rent. This should be calculated when you are looking at investment costs.
- Property income
Make sure you are not only thinking about what you have to invest in a property, but what you can get out of it, as well. Check out average rates in the area for similar rentals and do your best to forecast what type of profit you will be making when you consider your mortgage payments and additional expenses.
- Maintenance and upgrades
Don’t forget that when you own a property and rent to tenants, you own the property. Part of the reason they are renting is so that much of the work that goes into home owning is offloaded from them and onto you as a landlord. In Ohio, it is the law that landlords must make all repairs and do whatever is reasonably necessary to put and keep the premises in a fit and habitable condition. This includes keeping all utilities in safe working order and ensuring all doors and other structural aspects of the home are safe.Beyond just what is required, there are sometimes renovations you can make that will create more attraction to your property and also may create a situation where you can raise rent.
- Completed Upgrades
Also check out upgrades that may have been completed prior to the multi family home being put on the market. Did the seller just install new carpet? Is there a fresh coat of paint or new hardware on the cabinets? These smaller, cosmetic moves can make a property more desirable and remove the work from your shoulders in terms of sprucing up the property. With that being said, it is important to understand that some sellers will make simple cosmetic upgrades while ignoring crucial issues (such as those related to plumbing, electrical, roofing, etc.). It is vital, therefore, that you have a full understanding of the condition of the property.
Potential for future rent increases
When you are considering the rent you may charge at a potential investment property, also consider what rent may be in the future. Depending on the location and the state of the units, you may be able to forecast rates rising, which would offset even more of your investment costs and increase your profit.
Do I need to hire a property management company?
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If you are local and do not have a large number of units to manage, then a property management company may not be necessary. However, unless you are local and able to manage yourself, then a property manager could help you with key aspects of managing a property properly. If you have multiple properties then a property management company can help you manage the volume of requests that you have coming in. It can also help to keep your tenants happier and to reduce your stress and workload.
Property managers ensure that rent is collected on time, they deal with maintenance requests and routine repairs, and they work to properly vet and onboard all tenants. Property managers will typically charge between 8-10%, and may have additional fees for service calls, finding new tenants, or other additional services that they provide. Be sure to include this in your calculations when looking for a property to purchase.
How do I buy single-family investment properties in Cincinnati?
Purchasing a single-family investment property is similar to purchasing a home as a personal residence. A single-family property also means only having to manage one tenant. This is why many investors start out with single-family properties. When you purchase a single-family property for your investment, you don’t have to worry about the complexities of a commercial loan as anything with four or fewer units is considered a residential mortgage. Single-family investors still consider many of the same factors as those buying a large apartment building. This includes things like:
- Current Tenants – Many investors wish to sell a single-family rental while their tenants are still in it. If you are considering such a property, it is important that you obtain a copy of the current tenant’s lease, their rental history (which will show whether or not they have ever been late), documentation regarding any lease violations, etc. If the current tenant has a signed lease, then the new property owner will be required to honor that lease. It is crucial, therefore, that one knows what they are getting themselves into before buying a property.
- Utilities – It’s important to know what the approximate utility costs for the home will be and which, if any, utilities you want to include in the rent.
- Maintenance Issues – It will be important to determine the amount of work the residence needs, the amount of work that has already been done, and other expected maintenance costs. These amounts will be important in determining whether or not it makes financial sense to purchase the property.
Mary Beth Downing has worked with a number of investors buying single family homes, has relationships with the inspectors who will help you to determine the state of the property, and is an investor herself. We are here to help navigate you through the process.
How do I get a loan for single-family investment properties?
Securing financing for a single-family home is the same as buying a residential property. This makes it easier for first-time investors to navigate the process. First, you will want to apply for pre-approval and then begin selecting properties to view that are within a price range that will generate income and also are in a good location and in good condition. Single-family investment properties are not eligible for FHA or VA loans as they will not be owner occupied. As such, you can expect to be required to make a down payment of at least twenty percent.
What should I look for in single-family investment houses?
Single-family investors tend not to approach properties in the same way that they would a personal residence. Buying a single-family rental simply comes down to the dollars and cents. The first consideration is the cost of the property plus needed repairs, possible rent, and the possibility of appreciation. Also, it is important to understand that modifications to the home, which may appeal to one person, won’t necessarily appeal to everyone. Generally speaking, investors tend to look for “vanilla” homes that will appeal to the largest number of people.
Mary Beth Downing has assisted several individuals with single-family investment properties and owns several such investments herself. She will use this experience to assist you in picking out a rental property that fits your needs. Contact us today to purchase a home in the Cincinnati area.
How do I pick a real estate agent for Cincinnati-area investing?
When you’re selling property, you need a real estate agent that understands both ends of the transaction, someone who can help provide guidance in preparing your property, choosing the proper price point and finding a buyer as quickly as possible.
Mary Beth is the perfect choice for your investment needs in the Cincinnati area. Real estate agent Mary Beth Downing prides herself on offering top-drawer service and support throughout the entire investing or home-buying process and being reachable and responsive for all clients. With the fast-paced nature of the real estate market, it’s important to have a real estate partner who is on top of details and quick to make moves on their client’s behalf.