Investors raise concerns about rising rents, squeezed-out local buyers in Toledo

TOLEDO, Ohio — Jerry Hunter has lived on Western Avenue for more than 30 years, watching neighbors come and go. But he’s never seen the owners of the house next door — and for good reason. It’s owned by an LLC based in Australia, thousands of miles away from the broken windows, knee-high grass and rats that are now running from the abandoned property into Hunter’s yard.

“There’s a lot of people who come from different countries and are buying houses, and I don’t think it’s right for them to do that,” Hunter said, standing outside his neighbor’s home, pointing to his areas of concern with the structure, which are many. “I saw about two of them [rats] running over here last night, and I’m like, wow, now I gotta go find some stuff to try to get rid of the rats.”

In April, a Wall Street Journal headline declared Toledo a real estate goldmine because of the affordable mortgage and rental prices. But the positive publicity could spin into a negative for the local housing market. Hunter’s frustration reflects a growing concern in Toledo as foreign and out-of-state investors increasingly buy up local properties for rental income, sometimes leaving residents with absentee landlords who are difficult to contact and sometimes allowing properties to deteriorate. And sometimes, they leave behind unpaid tax bills.

A monthlong investigation by 11 Investigates has found that out of roughly 201,000 properties in Lucas County, nearly 9,500 are owned by LLCs. About 3,000 of those are controlled by out-of-state entities, including companies based in Australia, Israel, Saudi Arabia and across Canada.

In the United States, more than 6,000 of the LLCs are based in Ohio, but Michigan LLCs own 466 properties, Florida controls 473 and California investors hold 365.

The interest by outside investors could be tied to national attention Toledo began receiving this spring. In April, the Wall Street Journal declared Toledo the most affordable housing market in the country. Just one month later, a company called Riparian VPC Ohio SFR Portfolio LLC began an aggressive buying spree.

Between May and June, Riparian purchased 115 residential properties for $8.2 million, making it the largest LLC property owner in Lucas County. The timing wasn’t coincidental, according to University of Toledo professor Dan Hammel, who teaches urban geography and housing.

“Toledo sort of got a little bit of buzz about being affordable for home ownership, and if you start to look at some of these websites or trade publications that focus on real estate investors, Toledo’s now just plastered all over the place,” Hammel said.

The economic attraction is straightforward: investors can purchase Toledo properties for as little as $18,000 to $20,000, then charge rents that haven’t dropped proportionally to the city’s low purchase prices.

“Any time you see that differential between a low-cost purchase and an ability to charge a fairly high rent, you’re going to get a lot of interest,” Hammel explained. “That’s what the investors are interested in — you can make money by renting a house because you can buy it cheaply.”

While knocking on doors for our investigation, we came across a county employee doing work in an inner-city neighborhood. He raved about the housing market for investors, saying he owned a handful of rentals and they were paid off after three to five years. At that point, the rental payments were “pure profit,” he boasted.

The investor influx is making it harder for Toledo residents to buy homes, according to a south Toledo resident who asked that her name not be used because of her real estate connections.

“Normal people don’t get to walk through these houses. They are sold without signs being put up in the yard,” the woman said, pointing at multiple homes owned by LLCs. “The realtor reaches out to investors, who snap them up.”

These investors have significant advantages over local buyers. They can pay cash, don’t need mortgage preapproval and aren’t concerned about property conditions that might disqualify FHA loans. Riparian, based in Baltimore, has gone on a massive spending spree in recent months. Besides Toledo, the firm purchased more than 150 properties in Cleveland for $13 million. They have also bought properties in Detroit and Pittsburgh in the Midwest.

“It’s difficult to compete,” Hammel noted. “For first-time home buyers or moderate-income home buyers, this could be a real issue. You just can’t compete with the ease and the speed of the transactions.”

Last August, Riparian bought 297 properties in Pittsburgh from a local LLC. Riparian’s relationship with the city has been deeply explored by Colin Williams of the Pittsburgh City Paper in a multi-part investigation.

“We ended up experiencing many of the same issues you reported: short notice for home inspections that never ended up taking place, and a signed lease extension offer that was later rescinded and replaced with a 90-day notice to vacate,” Upper Lawrenceville resident Matthew Buck told Collins.

“I haven’t been able to reach them through any avenues,” a second anonymous tenant said to Collins. “All I’m looking for is answers.”

Collins documented widespread unhappiness with the Baltimore LLC, with many renters saying they have had trouble making contact with their new landlords and some people initially unaware their homes had been sold. 11 Investigates tried multiple numbers and emails with Riparian and did not receive a response. During knocks on the homes of people now living in Riparian properties, two different tenants said they were not aware of the change of ownership.

Toledo leaders are taking notice of issues with outsiders. District 4 council member Vanice Williams has dealt with problematic out-of-town landlords before and worries about the trend.

“The problem with out-of-town owners is they’re too disconnected from the neighborhoods,” Williams said. “How are you going to maintain these properties when you’re out of town and make sure the quality of life of the people that you’re having reside in these properties is up to par?”

At-large council member Cerssandra McPherson echoed those concerns, citing calls from tenants who can’t reach their landlords.

“They’re coming in and buying them, renting them out, but then they’re not fixing them up. They’re not answering calls from the tenants,” McPherson said. “We’ve got people that own properties in Las Vegas. I even had one resident – we looked it up – the property owner was in Hawaii.”

Despite the concerns, county officials acknowledge there are benefits to outside investment. When Riparian purchased its 115 properties, the company paid off $142,000 in delinquent taxes as part of the transactions.

With Lucas County facing approximately $116.1 million in total residential property tax delinquency, these payments help fund essential services.

“On the one hand, it is certainly a good thing,” Lucas County Treasurer Lindsay Webb said. “The taxing districts, the school districts that those properties are located in, are going to receive those funds that were delinquent. That will help educate our kids and pave roads and pay for police and fire.”

But Webb cautioned that the community must ensure “these folks just aren’t extracting resources from our community but are instead investing in our housing stock and in our neighborhoods.”

In fact, not all of the LLCs are good citizens. 11 Investigates found that outside investors currently own fewer than 5% of county properties, but they account for more than 15% of the county’s delinquent tax total. Webb has been targeting the outsiders with collection efforts, written on stationery from the prosecutor’s office.

“I have prioritized reaching out to entities outside of Lucas County in the state of Ohio and outside the state of Ohio to say we’re aware that you own property in our county and your property is delinquent and, respectfully, pay up.”

Lucas County Auditor Katie Moline processes these property transfers but has no authority to stop legal transactions.

“My task as county auditor is to ensure that we’re doing it accurately. I have no authority to stop the transaction if it is being done following the law,” Moline said.

Experts worry about several potential consequences from the investment surge. Hammel predicts rent increases as algorithm-driven companies raise prices more aggressively than local landlords.

“These are people that will raise that rent as often as possible,” he said. “If they can raise that rent every year, they’ll raise it every year. If they can raise it every six months, they’ll raise it every six months.”

There’s also concern about a potential local housing bubble if investors suddenly decide Toledo is no longer profitable.

“If all of a sudden the property they own in Toledo becomes unprofitable, they either try to dump it and then it goes very, very cheaply, or they just walk away,” Hammel warned. “That would give another round of vacant properties in Toledo, like we’ve had a couple of times before.”

Williams made clear she’s watching the situation closely in her district.

“If you’re spending $8 million, hold on to your investment. Toledo is up and coming and great development is happening here,” she said. “But if you’re coming here just to get a tax write-off and if you’re going to come and jack rent up, best believe that I’m coming for you if you’re in my district.”

County officials are pushing for state-level solutions. Moline said the General Assembly should act.

“There are two pieces of legislation that I think the General Assembly could tackle right now that would have a positive impact in neighborhoods and for property owners. First is increasing and expanding the owner-occupied credit so that credit goes to anyone who owns their home that they live in. That, of course, encourages home ownership,” she said.

“Secondly, there’s no law on the books right now with LLCs and their ability to transfer property once they own it, so that, of course, causes challenges for county auditors.”

The genesis of this investigation came from a tip from a viewer who said that homes in east Toledo and the inner city were selling for more than $1 million. And, sure enough, if you look at county property records, homes on Spring Street that are valued at about $20,000 sold last month for $1.4 million. But the sale was a transfer of dozens of properties from one LLC to Riparian. The cumulative cost is listed on each of the properties, though Moline said the listed sales price doesn’t count toward a neighborhood’s valuation.

For her part, Webb’s aggressive collection campaign against delinquent, out-of-county investors has helped her office reduce overall delinquency from 26,000 properties in 2020-2021 to about 17,000 currently.

For Hunter, his neighbors actually are up to date on taxes, but the home is an eyesore and he shakes his head in disgust while discussing the blighted property.

“My experience is bad, bad, bad, bad,” he said. “You can look at it and you see the windows are broken, the doors are really messed up and the sewage backs up. They’ve got a mess over there.”