We often receive inquiries about investment opportunities comparing Columbus with other nearby cities in Ohio. The first thing to check in such cases is how rental laws differ by region. Those with investment experience in places like New York or California tend to ask this question first, as they have encountered significant variations in rental laws from city to county in those areas.

To get straight to the point, within Ohio, whether in Columbus or other cities, the broad framework of rental laws is the same. The HB 430 bill passed in 2022 has effectively prohibited local governments from enacting rental cap ordinances through the amended law 5321.19. Therefore, local rent control is not implemented throughout Ohio, including Columbus.

However, if the budget is the same, it is worth considering how rent prices and property taxes differ between Columbus and other Ohio cities. According to Redfin data, the recent average rent in Columbus is around $1,395. Compared to other major cities in Ohio like Cincinnati and Cleveland, Columbus is positioned in the middle range, so if the rental laws are the same, this combination of rent prices and property taxes ultimately becomes a practical criterion for choosing a location.

Loan conditions apply equally regardless of the area. Investment properties require a down payment of 15 to 25 percent, and a credit score of at least 620 is needed to qualify for a loan, but a score above 740 is necessary to receive favorable interest rates. Interest rates are also set 0.5 to 0.75 percentage points higher than for owner-occupied properties.

The method of recognizing rental income also needs to be addressed. Lenders typically consider only about 75 percent of the expected rental income as income, and a rent schedule from the lease agreement or appraisal is required as evidence. Since this condition is uniformly applied across regions, it can be reaffirmed that the variables distinguishing investment opportunities are not the loan conditions but rather the rent prices and property taxes.

Applying the 1 percent rule to the Columbus rent of $1,395 means it holds true when the purchase price is below $139,500. Considering the prices of listings in downtown Columbus, it is not easy to meet this criterion exactly, and calculating the cap rate seems to be a more realistic choice. The cap rate, which is the ratio of net operating income to the purchase price, provides a much more balanced picture when comparing Columbus and other Ohio cities on the same basis than looking at rent prices alone.

Property taxes vary among Ohio cities, making it an important variable when comparing Columbus to other cities. The effective property tax rate in Columbus is around 1.55 to 1.60 percent, and the median property tax for a home valued at $265,700 amounts to about $4,110 annually. It is essential to note that this is higher than the Ohio average of 1.36 percent when making comparisons with other cities. While Columbus has a steady demand for rentals due to the presence of the state government, universities, and several corporate headquarters, it is important to view the accompanying property tax burden in a balanced manner.

Management costs are similarly structured in both regions. When outsourced to a management company, 8 to 12 percent of the monthly rent goes to fees, and it is common to set aside about 1 percent of the asset value annually for maintenance. Landlord insurance, which includes rental loss and liability coverage, is also priced higher than standard homeowners insurance. The fact that these fixed cost items do not vary significantly by region further supports the conclusion that within Ohio, rent prices and property taxes are the real variables that distinguish investment opportunities rather than rental laws.

Ultimately, whether choosing between Columbus and nearby cities, the combination of rent prices, property taxes, and purchase prices determines profitability more than the differences in rental laws themselves. In the long term, considering a 1031 exchange to defer capital gains tax is also worth exploring. The requirements are outlined on irs.gov. This article does not constitute investment or legal advice, and it is advisable to consult real estate and tax professionals before making any actual contracts.