BiggerPockets

Hello everybody,

Yesterday I found a property on craigslist Cleveland, a 8 unit (6 apt. and 2 store front) for only $95k. Building is rented out (month to month) and I can buy this house with my own money, but there is a snag.

Property has back taxes $12k and a pending tax lien, the owner will retire, he has more properties in Cleveland, but this is the only with back taxes.
The back taxes are not my problem, it´s the tax lien. I have no experience with. So please advice me, what should I do?

-Uwe

workerdrone,

Thanks for the advice, I was unable to contact any management yesterday, but Monday is this possible, I have the phone number from the property manager.
I take a screenshoot from the Auditor Site, under Flags you find a Y (yes?) by Cert. Pend. (certificate pending?), but by Cert. Sold is a N, confusing for me.

I agree with the month to month rents but I think we can negotiate this and I saw actual photos from the owner, the house is in good shape has new paint, new front doors, new windows, in StreetView from Google Earth is the House in bad condition.

-Uwe

MikeOH -

Thanks for your informations and the luck :) , the propertie is located on the Detroit Shoreway Border to Clark Fulton if you be familiar with this area so let me know please.
I know all the important things of commercial buildings, it´s the same here in Germany.
I can clear any city codes with the Buildings Department.
All the utilities pays the tenants, even common electric/water, trash/sewer pays the owner with $550 every three month. The gross monthly is $3k, the NOI (50% rule) is $1,5k, not bad.

The main problem is the area (I agree) and this tax lien. So I need a direct advice to handle this problem.

-Uwe

8 units for around $100k must sound pretty exciting Uwe, but I'm wondering why, if you want to purchase U.S. property while living in Europe, you'd be looking at Cleveland.

There are areas in the south and southeast that are doing reasonably well in the recession, and even appreciating. Still with bargains available. Many people are purchasing and remotely having them rehabbed and managed.

The median home price where I live is upwards of $200k, yet only 20 minutes away from me is a depressed area where I've seen houses under $10k. Nearly everyone that invests there loses money. Some do OK, but they know the area intimately and I think are very much present at their properties to keep an eye on them, plus know exactly what marketing works to resell or get paying tenants in.

Even Florida has got to be better for long distance than Ohio - there are lots of cheap properties in Florida at the moment, and it may have bottomed out. I don't know anyone who thinks of vacationing in Ohio :-) Maybe Mike staycations there?

It's good that are you working your way through your due diligence and at this point you certainly know more about this property and the local area than I do.

Chide me for being emotional, but nothing appeals to me about Ohio. I am all for diversified areas and long distance investing, but when I do it it will be in areas that I have an interest in visiting or possibly living in - then I can take tax deductible trips to them etc.

First and foremost I'll look at the numbers and what's going on in the local economy, but further down in the decision tree will always be a factor of - do I like the property / area? Would I want to be there?

Florida and Texas have some appeal to me - nicer weather and a friendlier climate for investors and landlords than my home state. People are retiring and moving to those places.

No offense to any Ohio residents I hope :-) And best of luck in your research and investing Uwe

Uwe,

To expand on what others have said, you generally want to invest in areas that are pro growth and attract business because a solid business climate is what drives real estate prices. For the most part, many of those markets are in the SE US. The best example of all this is all the foreign based automakers that build cars in the US. The vast majority of those plants are located in the South.

Your deal in Ohio may be a good deal now and even in a year or two. However, what happens when the population decreases enough that there is no longer the support to sustain your business occupants? Or the remaining tenants who no longer have good job prospects? Then your cash flow will be gone and you'll have a property that hasn't appreciated.

I get what you're saying. My point was not about avoiding risk but minimizing it. Ohio is part of the rust belt. That region of the US has been shedding jobs and population for decades. Obviously there are people here who have done very well for themselves in those markets so I'm not saying you can't succeed. I just think that being half way around the world (I invest out of state myself) you just want to minimize the risks as much as possible.

Brian and Isham C. -

I will do my homework, I order the rentroll, utilities bills and the profit and loss of the last year, I wait now for it.
I´m not willing to pay $95k with $12k back taxes thats fact, I think $80k is enough :). The seller said I´m the only interested. Have to see what can be done.

-Uwe

Received just the informations, rent roll, sewer and trash bills and P&L of 2009 until August. The owner will pay the back taxes before closing, I´m happy now.
Average monthly gross is $2,954, minus tax $283 (owner paid the June tax), insurance $168, sewer/trash/management $257, effective maintenance was $84, other 172, thats a NOI of $1,988. He has no reserves arranged. I think $50 per door is okay. So my NOI were $1,588. Excellent.
I take action in a Forum for the surrounding area and got the answer, not a worst and not the best area.
I prepare now the offer for tomorrow.

-Uwe

Thank you, I offered $87k now.

-Uwe