Looking for cash flow in Ohio

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Looking for cash flow in Ohio

Lesley Whitley
Southern California · Member since 2019 · 44 posts · 33 votes

I keep hearing that if you want cash flow, buy in Ohio.   I have been analyzing small multi family properties in Toledo, Akron and Cleveland areas.  When I plug the numbers into the Bigger Pockets calculator, I am ALWAYS showing a negative cash flow.  Over and over again, a negative cash flow.  I have great realtors I that are helping me, but I am wondering what your experiences are getting cash flow in today's market?  Are property prices just too high right now?  We are ready to buy, but not finding any deals.  If anyone has words of wisdom, this fairly new out of state investor would greatly appreciate your help.

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Brandon GoldsmithBusiness Member
Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
4y

Those cities in Ohio you mentioned definitely still cash flow very well so I would just double-check everything you are putting in to the calculator @Lesley Whitley

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  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    4y

    Those cities in Ohio you mentioned definitely still cash flow very well so I would just double-check everything you are putting in to the calculator @Lesley Whitley

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  • Jason SimonPro Member
    Rental Property Investor · San Francisco, CA · Member since 2020 · 18 posts · 7 votes
    4y

    Hi Lesley, I am also looking in the Cleveland area and have a duplex under contract. This is my first Cleveland property and I'm an out of state investor. What I was finding was that there were two types of properties available, which is probably what you're seeing. Either it cash flows really well but is in a really rough neighborhood or the cash flow is less than I hoped for (my goal was 8% +) but in a B/C+ neighborhood. I think the high taxes play a large role in depleting cash flow in Cleveland's nicer neighborhoods. For what it's worth, I settled on a duplex that will CF at about 6% with the goal of increasing rents and seeing appreciation over the long term. Being an OOS investor, I didn't want to get into a property located in a war zone so I sacrificed CF for piece of mind. 

    5Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Lesley Whitley 
    I definitely second what @Brandon Goldsmith said you should most definitely be getting positive cash flow in the Cleveland areas. 

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  • Christopher Abele
    Investor · Toledo, OH · Member since 2020 · 88 posts · 101 votes
    4y

    A lot of properties showing up on the MLS are investors that are "willing" to sell - but for top dollar.

    The war zone properties will typically have their own set of headaches. 

    My personal mantra is that there are no “bad markets” to invest in; your home market is the best market because you’re more likely to find a seller that you can work with on a more personal level. The challenge for every investor is to buy right - be that as an OOS investor or in your own back yard. My mindset is that there are two types of sellers in every market: those looking for top dollar and those willing to work with a buyer if they like the person. It’s easier to find the later in your back yard than it is 100s of miles away.


    Good luck in your search!!

    3Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    4y

    Hi all,

    This is Swanny.  Feel free to reach out to me regarding the Cleveland NE Ohio area.  If you really want to buy 1-4 unit that you can get residential loans on, I highly recommend Lake County, Ohio.  They are extremely landlord friendly there too. That would be East of Euclid, from Wickliffe to Painesville I have been extremely successful in that area.  I currently have 8 apartment complexes in that area.  I told my story of how I started there on Podcast 238!! 

    Feel free to message me and Lesley will tell you I love talking on the phone too.


    Swanny

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  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Originally posted by @Lesley Whitley:

    I keep hearing that if you want cash flow, buy in Ohio.   I have been analyzing small multi family properties in Toledo, Akron and Cleveland areas.  When I plug the numbers into the Bigger Pockets calculator, I am ALWAYS showing a negative cash flow.  Over and over again, a negative cash flow.  I have great realtors I that are helping me, but I am wondering what your experiences are getting cash flow in today's market?  Are property prices just too high right now?  We are ready to buy, but not finding any deals.  If anyone has words of wisdom, this fairly new out of state investor would greatly appreciate your help.

     I keep buying cash-flowing properties here in Columbus, Ohio. Maybe you are being to conservative with your numbers

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  • Mike Trzaska
    Investor · Cleveland, OH · Member since 2014 · 55 posts · 48 votes
    4y

    I'm local to Cleveland and you can definitely still find properties that cashflow. I will say you have to look a bit harder than you did a couple years ago. Are you just using realtors or you employing any other strategies (Wholesalers, Direct Mail, etc.)? Are you giving single families a look or just multis? With singles you can pass on water/sewer, lawn and snow removal to the tenant. Even on the market there are still deals, you just need to move fast and keep banging away with offers.

    What areas are you looking at? I agree that the East Side suburbs wipe out most cashflow with their taxes.

    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    4y

    Hi @Mike Trzaska

    I invest in Lake County.  Are you talking about Lake County?

    Swanny

    0Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    When you are using the calculator, are the property taxes, vacancy rate (shouldn't be very high) accurate? You might be accounting for too much on those ends which aren't allowing positive cash flow to show. What areas are you looking at in the Akron and Cleveland areas? I would probably avoid Toledo as Cleveland and Columbus will provide you the most opportunity for cash flow with stable appreciation in comparison. 

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  • Clay Boykin
    Real Estate Agent · Columbus, OH · Member since 2021 · 98 posts · 101 votes
    4y

    @Lesley Whitley Double check your numbers and your "magic formula". Those areas are cheap but cash flow accordingly. I personally like Columbus due to appreciation. Columbus is the 5th fastest appreciating city as of yesterday. I have a investor who BRRRR'd a deal in Clintonville and by the time he went to sell it, it had 80k in equity. (purchase price was 245k & rehab was 60k). Deals like this are very common off market, so that is a place I recommend to target. Happy investing!

    1Reply
  • Mike Trzaska
    Investor · Cleveland, OH · Member since 2014 · 55 posts · 48 votes
    4y

    @Michael Swan no, not Lake County…Mostly talking about Cleveland Heights, University Heights, South Euclid, and Shaker. 

    3Reply
  • Jabari Long
    Real Estate Broker · Detroit, MI · Member since 2014 · 384 posts · 149 votes
    4y

    What % are you putting down when calculating your ROI?

    0Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Joshua Janus  Thank you so much for your response to my post.  I am calcuating vacancy rate at 5% (which is what I calculate in most markets).  Do you think that is too high?  But I do think I am calculating something wrong because on paper, these are always minus cash flow (even if I calculate using "market rate rents". Thank you again!

    0Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Clay Boykin Thank you for helping me, I have gone over and over the numbers (non stop calculating over the past 2 months) so I really think I must be calculating something at the wrong amount. But I am not sure what I am doing wrong. I use the BP Rental Property calculator so it has to be something I am inputting. I am currently looking only at properties on the MLS as I don't know any wholesalers there. But others are finding cash flow on the MLS, so I think it is me. I appreciate your feedback.

    0Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Brandon Goldsmith Thank you for your comment which makes me hopeful.  Everyone says those markets are good for cash flow (maybe not as good for appreciation) .... I think I might be being overly responsible and overly cautious with my calculations, as another member suggested.

    0Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Christopher Abele Very interesting point and I had been wondering if lots of the MLS listings are purposely priced high by sellers thinking "i don't need to sell, but hey, if I could get X price then I would go ahead and sell" . I live in Southern California so buying investment properties here are super expensive. We bought a fourplex, but it is not feasible to buy a lot at the price point that properties go for her. That is what is leading us to look out of state. I appreciate your point of view and your feedback!

    0Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Michael Swan  Yes, I do know you like to talk on the phone (and in person too, haha) ... but you are a wealth of knowledge and a fun person to talk to.    Thanks for your comment on my post!

    1Reply
  • Lesley Whitley
    OP
    Southern California · Member since 2019 · 44 posts · 33 votes
    4y

    @Patrick Drury  and @Brandon Goldsmith Hi guys, thank you for your encouraging comments. I truly think I am being overly responsible and cautious in my calculations. I use the bigger pockets Rental Property calculator so I know it is not bad math ... but probably what i am putting in. It amazes me that these places in Ohio are 100+ years old so I think I am probably going too high on the repairs and the cap ex expenses? Those are really the only two expenses that I am estimating in the calculations ... other than vacancy rate which I calculate at 5% which I think is reasonable. I appreciate you both offering positive feecback about these markets and the ability to find cash flow on these MLS listings.

    2Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    You need close to 1% rules to cash flow I've found

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  • Dave PoeppelmeierBusiness Member
    Realtor · Maumee, OH · Member since 2015 · 491 posts · 722 votes
    4y

    @Lesley Whitley It also depends on what kind of properties you're looking at. Here in Toledo, if you're looking in A and B class neighborhoods, you're fighting with Owner Occupants and/or investors with deep pockets, especially for multifamily. Your C class bread and butter properties, both singe and multi-family, are going to be the easiest to get into right now. 

    I agree in that you are probably being a little too conservative in your numbers if nothing works. What are your percentages for maintenance, cap ex, and property management that you're using? You also don't need to budget as much money as you think you do if the home has been properly taken care of. If everything is old in the home, yes use 10% for cap ex. Bu if it's relatively new everything? Maybe 5% is sufficient. Your Realtor should be able to see what kind of condition the home is in regarding Rehab costs: does it just need paint, paint and floors, paint/floors/furnace? Also, just because a house is 100 years old doesn't mean it's going to fall down. In fact, houses that were built in the 1920's-1940's were built very well around here (as long as they've been kept up reasonably well). 

    The last part I would say is make sure your Realtors you're working with are investors themselves. Any Realtor can say they "work with investors", but if they don't practice what they preach, move on. Keep at it, you'll get there!

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  • Michael HelfantPro Member
    Realtor · Metro Detroit · Member since 2020 · 62 posts · 55 votes
    4y

    Drew Sygit, a recommended property manager of ours here in SE Michigan wrote this article not too long ago with some data regarding the Cleveland market. I stumbled across it as a Michigan focused investor and agent, but it has some interesting and applicable data. 

    https://www.biggerpockets.com/member-blogs/3094/95954-a-tale-of-two-rental-markets-metro-detroit-vs-cleveland

    I'm partial to our market :), but point being, it does seem doable there. 


    0Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    4y

    @Lesley Whitley cash flow is still there it's just fewer and farther in between. Since these prices have risen so quickly the rents haven't had time to catch up because they're a lagging indicator so it makes the numbers tighter. But if you find the right company that is able to keep that same resident in the house for an extended period of time and increase the rents it will help minimize cost and increase your COC over time. Are you looking at turnkey or doing it yourself? I don't have any experience in the Ohio markets but I do in the southern/middle part of the country.

    1Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    4y

    You must be using the calculator wrong, investors are cash flowing tremendously in Ohio, both off market and from the MLS

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Originally posted by @Lesley Whitley:

    I keep hearing that if you want cash flow, buy in Ohio.   I have been analyzing small multi family properties in Toledo, Akron and Cleveland areas.  When I plug the numbers into the Bigger Pockets calculator, I am ALWAYS showing a negative cash flow.  Over and over again, a negative cash flow.  I have great realtors I that are helping me, but I am wondering what your experiences are getting cash flow in today's market?  Are property prices just too high right now?  We are ready to buy, but not finding any deals.  If anyone has words of wisdom, this fairly new out of state investor would greatly appreciate your help.

     
    Not sure what you're looking at that's showing negative cash flow. Most people who come to Cleveland to invest run into the opposite problem. They show too much cash flow and become blinded to the level of risk involved. I mean you can buy duplexes for like $50k that show a rent roll of $1,500.....That puts blinders on folks from Cali like crazy. The most important thing to learn about Cleveland is the level of risk involved in each of the neighborhoods you are considering. Quality of housing stock, tenants, and neighborhoods varies A LOT in the Cleveland area. Give The Ultimate Guide to Grading Cleveland Neighborhoods a read for a great starting point in your research.

    2Reply
  • Nicolas Looman
    Real Estate Agent · Member since 2023 · 38 posts · 35 votes
    3y

    I would personally take the time to look at the Akron market. It's 30 minutes south of Cleveland, has a population of 200k, has 3 major hospitals, is a hotel desert and has a ton of opportunity to get higher caps without being in volatile markets. Akron's taxes are inherently cheaper and easier to hop into a b or c neighborhood without the competition of multiple offers.

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