2013-03-01_Ferguson_Personal REI Mag Columbus Article

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March - April 2013 . Personal Real Estate Investor www.PersonalRealEstateInvestorMag.com44

CAPITAL CITY / MIDWEST

By Scott c. Seckel

After Ohio became a state in 1803, fights broke out between political leaders over where to put the Capitol. It went from Zanesville to Chillicothe and

back again. The state legislature decided putting the build-ing and seat of government smack dab in the middle of the state was the most sensible compromise. Before their deci-sion in 1812, Columbus didn’t exist; it was a forest, popular with hunters. But the site was in the middle of the state and at the confluence of two rivers in a time when a lot of people got around by boat, so they built Columbus there. More cities have been founded in worse places for worse reasons. In terms of population, Columbus is an oddity. It’s the 15th largest city in the country (more than 787,000 residents, according to the 2010 census), but only the 32nd-largest metropolitan area (1.8 million, according to the last census). It’s the rare investor who sticks strictly within a particular city’s limits. Most go after metropolitan areas since cities have been growing since World War II and show no signs of

stopping. Few have the deep pockets to invest exclusively in “A” American cities like New York or San Francisco unless their name is Bloomberg or Trump, so investors research cities like Phoenix, St. Louis and Tulsa, hoping to earn the most bang for their buck. (See “B Cities,” this issue.) In the grand scheme of investing nationally, Columbus is a Class A “B” city.

$BUCKS & BUCKEYE$ And it’s why B cities are great. Columbus never expe-rienced the precipitous rises and falls of the palm tree and bikini cities like Miami, Las Vegas and Phoenix. It’s also not tied to any one industry in particular that has fallen on hard times. Here’s a list of what they do in Columbus: education, insurance, banking, fashion, defense, aviation, food, logis-tics, steel, energy, medical research, health care, hospitality, retail and technology. Not exactly representative of a one-track mind or economy, unless you are talking Ohio State Football. Then locals go beyond one-track or religious to zealot! Ohio State (the nation’s seventh largest university), along with having great post-grad academics, is Ohio’s tem-

Columbus, Ohio

“Ohio claims they are due a president as they haven’t had one since Taft. Look at the United States – they have not had one since Lincoln.”— Will Rogers

“I went back to Ohio But my city was gone.”— “Ohio,” The Pretenders

“Oh me oh my oh, look at Miss Ohio She’s a-running around with her rag-top down She says I wanna do right but not right now.”— “Look At Miss Ohio,” Gillian Welch

Buck$ &Buckeye$


ple of college football. Columbus is also the state capitol, home to not only state government, but city, county and federal government employees as well. J.P. Morgan Chase’s second-biggest office outside New York is in Columbus. Wendy’s headquarters is also here. It’s hard to say who makes America happier, but both are strong in Columbus. Golfer Jack Nicklaus, zookeeper Jack Hanna, ace of aces Eddie Rickenbacker, humorist James Thurber and burger slinger Dave Thomas have all called Columbus home. This is the time one feels like an amateur comedian who has just told his one good joke. “What Columbus does not have, to the despair of its leaders, is an image,” said a New York Times article about that topic in 2010. “As home to major research centers, it has long outgrown its 1960s self-concept as a cow town, and its distinction as the birth-place of the Wendy’s hamburger chain does not quite do the trick these days.” The story continued: “ ‘Columbus has not had a bad image,’ said Paul Astleford, director of Experience Columbus, which promotes tourism and conventions. ‘It has just had no image in the national marketplace.’ “And so, just as the Scarecrow searched for a brain and the Tin Man a heart, Columbus has embarked on a multi-year quest to define the city’s soul,” the Times continued in a truly inspired vein. “We are a diverse, youthful, knowledge-based commu-nity that is open to new ideas coming in,” Astleford told the Times. “That has not been the tradition in the Midwest.” So there’s Columbus as it is and as it would like to be known.

BROAD “PINK COLLAR” ECONOMY “Columbus is home to many diverse industries; we have banks, restaurants and insurance companies, health care,” said Chris Knoppe, director at Autumwood Funding. His company funds single-family home sales via hard-money loans in all states and has been investing in Ohio since the late 1980s. Autumwood Funding has been flipping homes,

buying REOs and doing hard-money lending since 2003. The principals own and manage 180 properties throughout central Ohio. “We’re active on the property management front, we’re active in rehabbing,” Knoppe said. “We know what it takes to borrow money. We’re probably more valu-able in Columbus than anyone else because we have 20 years of local knowledge.” Columbus wasn’t “isolated from the downturn – that’s for sure,” Knoppe said. “But because of our economic strength, we weathered it a lot better than other places in the state (that are) dependent on manufacturing and the automotive industry. Our unemployment was always a little less than the rest of the state.” Donato D’Alberto, of D’Alberto Real Estate Investments Inc. and Exit Trinity Realty, started in real estate with his brother in 1989 in their parents’ basement. Since then they’ve purchased hundreds of homes, rehabbed and rent-ed them. “We deal with all aspects of real estate,” D’Alberto said.

“After 25 years of doing this, it’s the best market I’ve ever seen. It’s a phenomenal time to buy. Inventory is low, and it’s been low since June of last year. The banks have not released a new batch yet, but they’re preparing to. ... The market seems to be up. Probably in the next two to three months we’ll see a new flood of inventory.” Local Market Monitor analyzes conditions in 100 U.S. markets, using such economic data as home values and growth in employment and population. Its latest report on Columbus characterized the invest-ment suitability of the city as “low risk.” “The next year is relatively flat, but it looks like it will increase after that,” said Local Market Monitor chief oper-ating officer Carolyn Beggs. “Job growth is outpacing the national average, so that’s pretty good.” Rents will significantly increase over the next three years, Beggs said. “It’s a good market to buy and hold. You’ll see an appreciation on your investment and an increase in rent. ... Things are looking good.” Let’s take a closer look at the Arch City.



COLUMBUSat a glance

STATE OF THE MARKET “Columbus has really started to come back,” Knoppe said. “Prices are rising.” Sales volume is increasing and days-on-market is shrinking, he said. “Inventory is also shrinking. ... (We have a seller’s market now.) ... All those factors con-clude prices will rebound in 2013. ... It’s kind of a dou-ble-edged sword; the bargains we’ve found over the past few years are harder to find.” Garland Ferguson sees the market picking up. Ferguson is principal of Diversified Realty Investments, a full-service real estate investment corporation that specializes in buying all types of distressed residential properties, from single-family homes to medium-sized apartment buildings. Diversified rehabs properties for owner-occupants, wholesales properties to other con-tractors and investors and has a full-time property man-agement division that manages rental properties for the corporation and other investors. “Columbus wasn’t a disaster, but Columbus was No. 2 in foreclosures in Ohio, behind Cleveland,” Ferguson said. “Prices didn’t totally bottom-out, but there were a lot of foreclosures.” MLS numbers are all starting to pick back up, he said. “Year-to-date, there’s been an overall 13 percent increase,” Ferguson said. “The average sale price in the market has been about 7 percent increase year-to-date. ... We have a large influx of out-of-state investors in this market. California investors have basically been feast-ing on this market.” Columbus is solid, said Sam Thompson, owner of Real Property Management Midwest, with offices in Cincinnati, Columbus and Dayton. “It’s definitely coming back,” Thompson said. Sales manager Matt Pelton said he is seeing fewer bank-owned properties. “They’re getting snatched up,” he said. “We’re see-ing a lot more investor-owners involved in short sales before it makes it to the bank.”

WHAT TO BUY Ferguson likes single-family homes, duplexes and small apartments (four units). “The cash flow on those, especially duplexes, is amazing. You can pick up stuff for $50,000 that’s worth $100,000, and rent them for $650 (a month).” Vacant houses can be good buys. Columbus is not like Detroit or Youngstown or East St. Louis, where entire blocks are vacant. “Most of the streets and neighborhoods have some vacancies in them, but the majority of houses have peo-ple living in them,” Ferguson said. “You have to look at it from an opportunity viewpoint.” Knoppe likes single-family homes at a certain price point.

• Capital of and largest city in Ohio, 15th largest city in the United States

• Area: 212.6 square miles• Population: 797,434 (1.725 million in the greater metropoli-

tan area)• Elevation: 902 feet• Cultural diversity: 65.8% white, 25.2% African-American,

4.3% Asian, 4.7% Hispanic. (Has the second-largest Somali population in the United States.)

• Geographic advantage: Lies within a one-day drive or one-hour flight of 60 percent of the population of the United States and Canada.

• Total employment (eight-county metropolitan area): 904,000• Nowhere but Columbus: The American Whistle Corp. is the

only maker of metal whistles in the United States.• Weather: Moderate climate, with temperatures ranging from

an average low of 20 (January) to an average high of 85 (July). Average rainfall is 37 inches per year; average snow-fall is 28 inches.

• Firsts (if not in Columbus, then close – so fame by associa-tion!): pop-top can (Kettering), cash register (1879, Dayton), electronically lit city (1879, Cleveland), U.S-built automobile (1891, John Lambert of Ohio City), automobile self-starter (1911, Charles Kettering of Loundonville).

• Attractions of Note: Motorcycle Hall of Fame Museum, Thurber House (former home of American humorist James Thurber), Topiary Garden (Georges Seurat’s famous painting

“A Sunday Afternoon on the Island of La Grande Jatte,” cre-ated in topiary in downtown’s Old Deaf School Park, includes 54 topiary people, eight boats, three dogs, a monkey, a cat and a real pond), The Wilds (10,000 acres of reclaimed mine land is home to a variety exotic animals and offers overnight stays in cabins and yurts as well as safari tours and rustic experiences)

SOURCES: U.S. Census Bureau, City of Columbus, Experience Columbus (formerly Columbus Convention & Visitors Bureau), www.ByCityLight.com


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The median sales price for homes in Columbus is $81,000 (based on 1,523 sales from October 2012 to December 2012 and a decrease of 12 percent from the same period a year earlier). The average price per square foot is $77 (down nearly 90 percent compared to the same period a year previ-ously). Some of the most popular neighborhoods and aver-age listing prices include German Village ($311,585), Olde Town East ($79,838), Forest Park East ($88,500), North Linden ($58,168) and Blendon Woods ($156,071).SOURCE: Trulia

“We like to be near the median price point,” he said. “Most people are buying houses in that price point. We’re looking at the $139,000 median price; it’s nice to be within 30 percent of that.” Pelton believes single-family homes with three bedrooms is the way to go. “Singles with three bedrooms and up,” he said. “You want to stay away from two-bedrooms, one-bedrooms, unless you’re in a hot area like urban Short North, an isolated hot area where you can do pretty well with high pricing.” Short North is a trendy area adjacent to the Ohio State campus. “What’s been hot out in the urban areas outside of downtown are starter homes that rent for $1,000 a month,” he said. “That’s the new trend for investors – they’re going after the $80,000 to $100,000 (price point).” Shoot high of the middle, Thompson said. “We’re seeing around a $1,000 renting a whole lot quicker,” he said. “It’s an easier tenant to find, it’s a more solid tenant to place.” Pelton agreed. “They stay four times as long, and take so much better care of the place,” he said. “You can still rent a place close to downtown for $650 to $700, but the problem is the people only stay nine months, and they tear the place up. You’re much better renting that three-bedroom for $800 a month. Your turnover cost is so much lower, and your income is greater. “ Thompson said he’s seeing many people choosing to rent rath-er than buy. “We‘re seeing so much better tenants,” he said. “We’re seeing a lot more qualified tenants, people who used to own homes who are renting now.” Urban Columbus is undergoing a lot of revitalization, and rents are rising as well as prices. One- to three-bedroom condos in Short North rent in the $2,500 range and landlords are getting it. “People in Short North who are roommates will split a three-bedroom for $2,500,” Pelton said. “It’s near campus, it’s trendy, it’s near OSU. That’s driving the rents up – just out of college and just starting a job.”

WHERE TO INVEST “Anything around the (70/270/670) belt or inside it is a good price to start,” Knoppe said. Here are his picks: Grove City, Blacklick, Pataskala, Gahanna, Westerville, Reynoldsburg, Hillaird, Marysvale and Delaware. “Those are all good suburbs where the prices are going to be $100,000 to $180,000,” Knoppe said. “Those are the suburbs that saw a lot of building during the 2000s and a lot of foreclosures.” First- and second-home buyers like these neighborhoods, he said. “They’re great for buying, fixing and selling. They’re also good holding areas.” Closer to the city, properties will cash flow better – on paper.

“Those areas are less stable, with higher crime, and you’re going to need a stable local property manager,” he said. Thompson had an almost identical list of good suburbs to invest in. “As far as suburbs go, Westerville, Grove City, Worthington, Dublin and Hilliard,” he said. “Dublin is 25 minutes north of down-town; we get a lot of properties there. We can’t keep them. They rent in 48 hours. “



Ferguson’s personal favorite is an area west of downtown called Hilltop.

“It’s a good cash flow area for inves-tors,” he said. “A lot of people have made a lot of money buying properties on the Hilltop. Properties are inexpen-sive, and they cash flow great.” D’Alberto also has a soft spot for western Columbus. “To me, I love the west side of town,” he said. “I’ve had so much suc-cess on the west side. You can pick up property dirt cheap and rent it out.”

WHAT INVESTORS NEED TO KNOW There are lots of pockets of good and bad areas. “You need to know your area,” D’Alberto said. “Columbus has a lot of Swiss cheese in it.” Get a good rental analysis before buying, Pelton said. “You can go three blocks over and the rent is $1,000 more,” he said. “You want someone local (to advise you) for sure.” Real Proper ty Management Midwest is happy to help out investors looking for property. “We get a lot of inquires from investors,” Thompson said. Keep an eye on property taxes. They may be too high, said D’Alberto. “Taxes aren’t rising anymore, but they’re not dropping either,” he said. Investors can appeal to the Franklin County Auditor. “You’ve got to be aggressive,” D’Alberto said.

Become acquainted with school districts. There are about 30 of them, some small, some huge. “Team up with someone local who can navigate from one area to another,” Knoppe said. “There are a lot of them, and that’s what makes it tricky. Even within the Columbus School District, which is huge, there are going to be some pockets with better schools.” D’Alberto said he worries more about school districts when he’s han-dling upper-middle-priced homes. “School districts are a concern when you’re dealing with upper-ech-elon homes, but people in that lower price point will take what they can get,” he said. Holding is the correct strategy in the current Columbus market. “Right now the market is in hold-ing properties,” D’Alberto said. “This is the time to build cash flow. ... Right now you’ve got builders who are build-ing apartments for cash flow. There are tons of renters on the market. Columbus is better than Cincinnati or Cleveland right now. We’re the best city in Ohio (for investors).” Ferguson agreed that now is the time to build a portfolio in Columbus. “I believe the market will come back, so now is a great time to get your properties,” he said. “There’s a lot of stuff here that needs work done to it. It’s not so bad that it has to be totally rebuilt, but if you buy something like that, you can buy a house that needs

a total rehab for $5,000. ... You’re not going to have any problems in this mar-ket if you do your due diligence and buy your properties right. The market is good, and the tenant base is good. There’s a lot of opportunity out here. Work with someone who has feet on the ground. We can help you find the best properties available out here.”

RESOURCES

Sam Thompson, OwnerMatt Pelton, Sales ManagerReal Property Management [email protected]@rpmmidwest.comwww.rpmmidwest.com

Chris KnoppeAutumwood Funding/Ohio Rehab Homes614-433-0570 [email protected]

Garland FergusonDiversified Realty Investments614-259-5711drinvestmentsllc@gmail.comwww.WholesaleHomesColumbus.comwww.SellHomeColumbus.comwww.DiversifiedRealtyInvestments.com

Donato D’AlbertoD’Alberto Real Estate Investments Inc.Exit Trinity Realty 614-269-4663donato@dalberto.comwww.columbusohioproperties.comwww.dalberto.com

Carolyn BeggsLocal Market Monitor Inc.919-896-6313cbeggs@localmarketmonitor.comwww.LocalMarketMonitor.com


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2013-03-01_Ferguson_Personal REI Mag Columbus Article

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