Welcome to another edition weekly Market Hunter Thursday with Herve. Today we are going to
Cincinnati, Ohio. Mr. John Casmon from Casmon Capital Group. Just real quick on some stats on
Cincinnati. Population, 307,000, medium income, just under $40,039,000, median rent, about $930,
and medium home value, about 150,000. Cincinnati is home to headquarters of companies like Kroger
Foods, Proctor and Gamble, Cintas, and a bunch of others. So without further ado, our man here, Mr.
John Casmon. John, welcome aboard Market Hunter Thursday with Herve. How are you, my man?
Herve, listen, I'm excited to be here, man. Thank you for having me on the show,
and it's going to be a fun time. So John, let's just jump into it man,
there's a lot of markets to choose from. Why Cincinnati? What do you see some of
the opportunities taking place in the city, whether you are a novice or you are a veteran
real estate investor such as yourself? So I moved to Cincinnati about a year and a
half ago. And prior to that, I was going through the same exercise, trying to figure out where
I wanted to invest. I was living in Chicago, and while we had some success investing in Chicago,
to get the deal full, the cash that we were looking for to scale into larger apartments,
we really needed to be in a different market. So we kind of took a look at
the different publications and there's some great ones out there, Marcus & Millichap does
one every year. IRR does a great one every year. So there's different publications
that kind of list out all the markets. And what we started to see consistently
was Cincinnati was one of the top five yield markets. Now yield, of course, is the cashflow
that you can expect when investing in a market. The big difference though, is out of the other
four markets, Cincinnati was the only one that was stable, or seeing population growth.
So small growth, it wasn't huge population gains, but it was actually going in the
right direction. The other markets like Detroit and Cleveland and markets like that,
they were seeing more of a population decline. So maybe in the urban core, exactly downtown,
those areas were doing great, but as you look at the overall metro area, they were suffering.
First of all, you want to take a look at the population, and the population was very stable.
Then we looked at the affordability. Median rent still being under $1,000. Now it's 930,
a couple of years ago, it was in the 800s. So very affordable market. As a matter of fact,
the [inaudible 00:02:22] ranked the number one affordable market,
as far as big cities are concerned, in the United States. So we just felt that, "Hey,
there's a lot of upside here, potential." And it makes all the sense in the world. I mean,
we keep on hearing more and more about population migration, and it has just
accelerated. Rent that you're getting in from your tenants is not only covering your mortgage, but,
and then some. And that allows you to go ahead and have excess capital, go ahead and deploy for
your other investment opportunities. What's the real estate strategy that you pursue that kind
of best fits what you do on a day-to-day basis? So we do apartment syndication, where we partner
with other investors, similar to what you guys do. So we partner with other investors
and we find the right opportunities, and we go in with the business plan, where we're
going to try to force the appreciation. So we're looking for ways to increase
the income of the property, and be able to sell at a higher value based on that.
So because of that, and because rents are very low, what happens is
a lot of times owners aren't incentivized to go out and reinvest in their properties.
So if they're making money, they bought it at a low basis, it's cash flowing nicely, why would
they invest four or $5,000 into each unit to upgrade it just to make another hundred bucks?
For most of them, it's not worth the effort. So when we come in as new buyers, there's that
opportunity to create value add that maybe the current owners aren't even interested in,
just because of the amount of work. When you go to other markets, I guess even other markets in the
Midwest, you see that being done more commonly, where you have new ownership groups who've only
had the property for a couple of years, so they're trading hands more frequently.
In Cincinnati, you don't see as many trades, so that's the one downside.
You don't see as many properties trading hands so you're typically dealing with an
older owner who's had it for a while. So with us, we're looking to come in, create value, and
be able to implement our business plan. And the way the city is laid out, there's different areas
where that growth and that development is taking place. And one of the things that I have learned
early on in investing is figure out the path of progress. Where's that development taking place?
And if you can hone in and get yourself to invest along that path of progress,
you are going to have some success because the rest of the area is going to be lifted up by
other investors. And you want to make sure that's happening, I want the government to invest in this
area. I want schools to invest in the area. I want businesses to invest in the other, and I
want other developers, other investors to come in and put money and capital into this location.
So for us, it's not about just what I can do to a single property, it's, "Hey, I see what
I can do. What's everybody else doing? Where have you guys identified as the next hotspot,
or the place where you want to see development and growth?" And if you can find those pockets,
that's where you could be really successful. John, how are you finding ways to
target some of those older owners? We try a lot of different things, and I think
ultimately, it takes patience because unlike maybe three or four years ago, most investors understand
that the market's hot. So typically they have some high pricing expectations and we come across that
very frequently. But nonetheless, do you want to build those relationships. This is a place where
it helps to get to know someone and if they know you and they like you, they may be willing to do
business with you, whenever they're ready. The first thing you want to do is always go
through the brokers. The brokers make their living by having these conversations so they have a
better sense of who's looking to sell, who's not looking to sell, how long has someone been in on
a deal, what's the backstory? They're going to already have some of that stuff. So I would say,
before you just go and try to get off market deals, try to understand what's the landscape
of opportunities by talking to the brokers. Now you certainly can go off market. We have a
lot of conversations. Our team is... We kind of go through weekly and identify some properties that
we want to reach out to the owners with, talk to them, start the dialogue going.
And that's gotten some opportunities going, but I think it's really important just to understand
that you can't rely on one method. And I think the key word there is being
patient. Try multiple different strategies and being patient with all of them. When folks talk
about type of properties, A properties, B property, C properties, and whatnot. Do you
specifically target the type C properties? We like B class properties. And just to set
the table of what we're talking about. So, an A-class property is going to be a really
nice kind of a luxury, great neighborhood, top of the line type property. Newer construction,
great location. B is going to be a little bit older, maybe 20 to 30 years old,
solid, definitely great working class, maybe the household income is anywhere between 50 and 80K or
something like that, 50 and 70K, solid location, not the top of the top, but it's certainly a fine,
desirable place to live. And then you get into C where it's more working class,
maybe you have some parts you have to watch out, and know which side of town you need to be on.
The way I look at the business is this, the better quality property is going to be easier to manage
based on both the resident you're attracting, as well as the physical asset itself. So we have to
take all those factors into consideration because it adds to additional risk. The way we see our
strengths, we believe the B class properties are a better fit for us. If you've got a great team
that is all on top of it, and great leasing agents, great property managers, great
maintenance crews, conflict resolution, then yes, there's great opportunities to do the C class.
But for us, when you look at the additional work that it takes, and then you factor in what's the
pay off for that, when we compare that to a little bit of a nicer property, for us, the additional
cashflow you might get out of this, it's washed out. And not to mention, if you have one bad
resident, or rough resident who destroys a unit, or you've got to do evictions, or all that stuff,
well, that additional cashflow gets wiped out. So you have to balance all of those things too.
When you talk about targeting the type assets, how would you kind of describe the neighborhoods
of some more attractive areas to invest? When I was making that transition into Cincinnati,
one of the things I did was I actually launched a podcast.
There you go. I launched my show, Target Market Insights, and
the whole reason I launched this show was to learn how to find the best places to invest.
And I promise you, my very first episode, check it out if you don't believe me, episode number one,
I had a broker on and I asked him the same question you just asked. And he gave me the
answer. And I was like, "Damn, I don't even think I need to keep doing this show." Sometimes there's
a North side and a South side, like in Chicago. In Cincinnati there's a East side and a West side. So
what's the defining line? For Cincinnati it's really I75 is kind of that dividing
line between West side and the East side. So first of all, I would say, cut it in half,
just pick a half of the city that you're interested in, and focus on that, learn that
before you try to learn the entire metro area. Then you have to understand, like the way
Cincinnati works, there's Northern Kentucky, which is a part of the Cincinnati MSA, even
though it's in a different state, it's part of the MSA, and then you also have your suburbs. For our
business plan, looking for B class properties, there were a couple of buckets of locations.
So first of all, the city, if you go on the East side, there's a street called Montgomery,
it's called the Montgomery Corridor. Those are neighborhoods like Oakley, Norwood, Pleasant
Ridge, Silverton, there's all these neighborhoods and suburbs that go up and down this corridor,
that's where a lot of growth has taken place. But you start looking at the data, where the
developments happening, there was a brand new apartment complex and a condo community being
built in Silverton, along this corridor. They were building a brand new exit ramp in Pleasant Ridge
over there. So now you're seeing what they're doing, what others are doing to the area, and I
can lean into their development, their investment, and just find properties along this corridor
that are going to be successful for me. The other area that's extremely popular right now
is Northern Kentucky. Now we haven't talked about this yet, but Amazon is building a one and a half
billion dollar air cargo hub. The first for them in this country. You can get to most parts of the
country, the major cities fairly quickly. So it's really well located from that standpoint.
And the cost of living, as we talked about, is much less.
Last, the Kentucky side is actually a little bit more business friendly,
and it also is more landlord friendly. So they actually came up with some credits and things
like that to allure a company like Amazon, and they've seen great business growth. But
I would say, whether you're in Cincinnati or any market, find the path of progress.
And that's one of the most amazing things, man. I mean, you really hit the nail on the head.
It's really just kind of simplifying [inaudible 00:11:27], the Amazon effect, it's a Trader Joe's,
it's the Whole Foods effect, and what not. When you look out over the next couple of years,
what are some tips in getting started? And we can say specifically in Cincinnati,
because we know that there's so many facets to real estate investing.
I would say, from my own experience, really focus on the team. Cinci's a great market, but if you
can't build the best team in Cinci, it may not be the market for you. If you're an out of market
investor, say you're in California or New York, I would give you two options. You can go passive
and do the turnkey thing, but make sure you have a great property manager that you trust,
that you can work with, and will be able to take care of the property.
The other option is to invest passively with a group like ours, because we're here, we're local,
we know the market, we're going to be actively overseeing things. And by investing through our,
or with us, now you get a chance to get all the advantages. You know we've got the boots on the
ground, and all of that stuff, but you're not trying to, over here, manage it by yourself.
Even if you just do that once, so you can then pivot to your own, it gives you a chance to really
learn the lay of the land, and kind of build your own team, and understand what's going on in this
market before you just buy something, and now you're trying to figure it out on your own.
What can we do for you and the Casmon Capital Team to help you grow and achieve goals that
you've lined out for yourself for this year? Man, two things, man, are great. So first of all,
if you have gotten any value out of this conversation, you're looking for more insights
like this, even if you're looking outside of Cincinnati, we do not just talk about Cinci
[crosstalk 00:13:01]- Sure, of course.
... we talk about plenty of markets. My podcast is called Target Market Insights, it's a multi-family
and marketing show. You can find it anywhere you listen to podcasts. So subscribe to it
and leave us a five star rating and review. So that's the first thing that you all can do.
The second thing is I have a free sample deal on my website. So if you are an active investor,
or if you are a passive investor, people get a lot of value just in seeing what a package looks like.
Because a lot of times you got to actually sign up for someone's deal, and you got
to figure out how to talk to them so you can learn. And if you're in a learning
phase and you just want to know like, "Hey, what's an IRR? What should I be looking for
when I get a deal presented to me?" Or if you're the active side, you're like, "Hey,
what should I be telling people? What do I need to tell them about a market? What do I
need to tell them about my business plan?" I think the sample deal's a great place to
learn a little bit more. And then also, if you're interested in doing some stuff with us, you'll get
more updates on from that standpoint. So you can check that out at casmoncapital.com/sampledeal.
And like I said, it's free, it's a great way to learn, and you'll learn a little bit
more tips from us in our newsletter. John, listen, I can't thank you enough,
man. I appreciate it. I wish you nothing but much success this year. Please feel free to
come back anytime, would love to have you. You have John's contact information right there,
his email address, his phone number. I wish you guys much success, successful investing,
please stay healthy. And until next Thursday, be well. So you soon. Market Hunter Thursday!