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Where Smart Investors Are Looking to Buy Real Estate in 2020

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cincinnati ohio skyline

cincinnati ohio skyline

From the rolling hills to the riverbanks, the landscape surrounding Cincinnati is picturesque. Located along the Ohio River in the southwest corner of the state, residents experience a wide variety of temperatures, with snow in the winters for Christmas and hot summers.

Known as the “Queen City of the West,” Cincinnati has become popular among professionals and millennials looking for an affordable place to raise a family. The University of Cincinnati, Xavier University, and other nearby educational institutions attract more than 50,000 students to the area.

The Cincinnati metro actually bleeds into Indiana and Kentucky and is the third largest metro area in the United States. Ohio has the 7th largest economy in the Midwest and the total GDP for the Cincinnati metro area is around $141 billion dollars. The median household income is approximately $65,000.

Cincinnati's affordability and job growth continues to attract a diverse population, which is a major reason it has become a hot spot for investors looking for cash flow. Some neighborhoods have delivered high appreciation over the past few years and continue to.

invest in midwest

That said, our world has experienced a lot of change and uncertainty in 2020. No city or state in the U.S. has gone unscathed by the coronavirus pandemic. But there are still strong real estate markets out there and key indicators of a healthy market remain the same.

First, let’s consider how COVID-19 has impacted Cincinnati and what it means for investors looking to buy there.

The Impact of COVID-19 on Cincinnati

Before COVID-19 crashed the party, the national unemployment rate was at an all-time low. When the pandemic forced businesses to shut down, most states began seeing job losses pile up quickly and unemployment claims skyrocket.

As of August, national unemployment rates were around 8.5%. In the Cincinnati metro, the unemployment rate was 8%. As the economy reopens, jobs are coming back. About 600,000 jobs returned to the nation’s workforce in September. The good news is, Cincinnati’s workforce is expected to go up by at least 6% over the next 10 years. More jobs means more people, and people will always need a place to live.

4 Best Practices for Investing in Cincinnati

No. 1: Invest in properties that the average person in the area can afford.

A 2019 report by Realtor.com ranked Cincinnati as the second most affordable place to raise a family in the U.S. The cost of living is 10% below the national average. Housing expenses are 24% less when compared nationally. Healthcare costs are 2% below the national average and utilities and groceries cost less, too.

The median home price in Cincinnati proper is $174,276 (as of October 2020), which is 33% below the national average. The average home price in the Cincinnati metro area is currently $197,135—a 7.2% increase compared to last year. Zillow predicts home values will go up 5.3% over the next year.

Overall, Cincinnati is amazingly affordable compared to other big cities around the country.

No. 2: Invest in areas that are growing.

Over 1,000 people moved to the city of Cincinnati last year. The total population of the metro area is about 2.2 million. The number of people moving to the Cincinnati area has steadily increased over the past 10 years. While the rate at which people are moving to Cincinnati may not be as high as other cities around the country, the growth is steady.

As of 2019, the best up-and-coming neighborhoods in the Cincinnati area include:

  • Downtown
  • Walnut Hills
  • Mount Adams
  • Oakley
  • West End

No. 3: Invest in areas with job growth.

In September, almost all employment sectors in the Cincinnati metro saw job gains. More than 12,600 jobs were added to the metro. The industries with the biggest job gains were: government, professional and business services, trade, transportation and utilities, employment services, education, and health care.

Job growth in the greater Cincinnati area since last month was up 1.2%. However, there are still 5.5% fewer jobs than there were last year, due to the pandemic. Cincinnati, like many towns in the Midwest, was known for manufacturing. While manufacturing is still a big contributor to Cincinnati’s economy, jobs in other industries are growing, as well. Health care, service, and business and professional sectors all play a major role in adding jobs to the workforce in Cincinnati.

Cincinnati is home to more than 30 Fortune 500 companies. The city’s largest employers include:

  • Kroger (21,000+ employees)
  • University of Cincinnati (15,000+ employees)
  • Cincinnati Children’s Hospital Medical center (12,000+ employees)
  • Procter & Gamble (12,000+ employees)

Other major employers with headquarters in the Cincinnati area are Macy’s, GE’s Global Operations Center, and TriHealth. Nearly a fifth of the jobs around Cincinnati are health care jobs.

CVG or Cincinnati/Northern Kentucky International Airport sees more than 8.9 million people travel through their airport every year. CVG provides direct flights to 38 top markets across the U.S. and Europe. One of DHL’s Express Super Hubs moves upwards of 1.2 million tons of cargo coming through the airport.

No. 4: Invest in areas with strong rental demand.

The average rent for an apartment in Cincinnati is around $1,007 per month—well below the national average. Rents have gone up 4% compared to 2019 and 30% in the last five years, according to Zillow.

Cincinnati has high rental demand. More than half (55%) of all households in Cincinnati are renter-occupied, while 44% are owner-occupied. This demand is in large part due to the student population that the educational institutions attract. Over a third of residents have at least a bachelor’s degree. And 87% have either a high school diploma, some college education, or are university graduates.

The best neighborhoods around Cincinnati for young professionals include:

  • Downtown
  • East Walnut Hills
  • Hyde Park
  • Mount Lookout
  • Over-the-Rhine

The best neighborhoods around Cincinnati for young families include:

  • Deer Park
  • Pleasant Ridge

The best neighborhoods around Cincinnati for rental demand are:

  • Pleasant Ridge
  • College Hill
  • Loveland
  • West End
  • Evanston

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Sample Properties in Cincinnati

Here’s an example of cash-flowing rental property located in a good market in Cincinnati. (Keep in mind these numbers are estimates.)

Sample Property No. 1: Single Family Rental

  • Property: 4-beds, 2.5-baths, 1,700 square feet
  • Purchase Price: $219,900
  • Down Payment if Financing: $43,980 (80% loan-to-value at 4%)
  • Initial Cash Invested (including closing costs): $48,378
  • All Cash Purchase Initial Cash Invested (including closing costs): $222,099
  • Monthly Rental Income: $1,725
  • Monthly Cash Flow: $462 with loan; $1,302 cash purchase
  • Annual Cash Flow: $5,544 with loan; $15,624 cash purchase

Sample Property No. 2: Single Family Rental

  • Property: 4-beds, 2.5-baths, 1,646 square feet
  • Purchase Price: $229,900
  • Down Payment if Financing: $45,980 (80% loan-to-value at 4%)
  • Initial Cash Invested (including closing costs): $50,578
  • All Cash Purchase Initial Cash Invested (including closing costs): $232,199
  • Monthly Rental Income: $1,845
  • Monthly Cash Flow: $451 with loan; $1,359 cash purchase
  • Annual Cash Flow: $5,412 with loan; $16,308 cash purchase

Conclusion

Savvy investors look for markets that are recession-proof. The Cincinnati housing market was barely affected by the last downturn. Today, it is one of the fastest recovering markets after the COVID-19 shutdowns.

The laws are landlord friendly and the home prices are low, while rents continue to rise. Cincinnati is one of the last places in the U.S. where you can still get high cash flow and the potential for appreciation over time.

This post was originally published on this site

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