BRRRR in Cleveland And Akron?

21 Replies

Hello BP community! 

I am currently looking to get into multi family rental property using the BRRRR method. I'm looking at properties in the Cleveland and Akron areas of northeast Ohio. A duplex can be had most times for 10k-20k and sometimes even less. They all obviously need rehabbed. I am just worried that once I buy and rehab I wont get a high enough ARV to refinance. I can't find any good comps, It seems a lot of the properties sell at this price and none are selling that are turn key and freshly rehabbed. Neighborhoods aren't the greatest but rents go from 450-650 atleast. None I can find on zillow are rehabbed so I'm not really sure what the arv will be. I don't want to go off the zestimate because we all know what a crock that is! My goal is to be all in on any given property for under 25k with purchase and rehab which I think is doable. I would like to see atleast a 50k-60k arv. I will do most of the rehab myself with my partner (my father in law). Anything we can't handle will be directed to my contractor who is a good friend of mine. As I've read it seems like for any bank to refinance the property will have to be worth atleast 50k. Hopefully someone from the area can chime in and help me out. Any help would be greatly appreciated! Thanks again.

Hi Jerad,

Your can hit your numbers in Cleveland, but not in the suburbs.  I can help you find both on and off market deals that will meet your criteria and work for your strategy.   

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

Originally posted by @Federico Gutierrez :

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

 Federico, 

You bring up some very valid points. The only reason I have behind going with the distressed 10-20k properties is that is pretty much what we have to start our investment with. We have about 35k but I don't want to blow through all of that. I want to have some reserves left over. I know the areas aren't the best, I grew up in Brunswick, so I've been in the area my entire life. So right now I'm kind of torn on what to do and where to start. 

@Tim Debronsky
I recently purchased my first SF in Cleveland OH (Old Brooklyn area) so far I am satisfied with the outcome.
Since then I have been doing research and I think multi family Is the way to go.
Looking to purchase a a MF by the end of this year, PM on the deals you have coming up.

Originally posted by @Nick Sandoval :

Tim Debronsky
I recently purchased my first SF in Cleveland OH (Old Brooklyn area) so far I am satisfied with the outcome.
Since then I have been doing research and I think multi family Is the way to go.
Looking to purchase a a MF by the end of this year, PM on the deals you have coming up.

 Nick, 

Thanks for chiming in. I know it can't all be bad. Shoot me a PM with what your looking for and I'll keep an eye out.

Thanks,

Jerad 

@Jerad Miller

Make sure you have a plan in place for management on those sorts of assets. If you're local and both willing and able to self manage then you may be alright. But if you need to hire out the management it can be difficult to find good help in some areas.

Originally posted by @Timothy Murphy III :

@Jerad Miller

Make sure you have a plan in place for management on those sorts of assets. If you're local and both willing and able to self manage then you may be alright. But if you need to hire out the management it can be difficult to find good help in some areas.

 Tim,

Utilizing a local management company is most definitely my plan of action. I have no time to self manage. I currently work in the restaurant industry logging 65 plus hours a week. So I will absolutely have to have a management company in place. 

@Jerad Miller  

Hey Jerad,

I'm also looking to invest in those areas being from Akron and now living in Cleveland. Your plan of action is surely possible. Not only for multi-family but also some single family homes. In my current neighbor there are several I found for less than 20k. They will bring competitive rent rates as the surrounding homes are in decent shape. 

I'd love to discuss more of your plan and possible alternatives, I'm sure I can be of service in helping you find exactly what you need.

Henry

Originally posted by @Henry Omenai :

@Jerad Miller 

Hey Jerad,

I'm also looking to invest in those areas being from Akron and now living in Cleveland. Your plan of action is surely possible. Not only for multi-family but also some single family homes. In my current neighbor there are several I found for less than 20k. They will bring competitive rent rates as the surrounding homes are in decent shape. 

I'd love to discuss more of your plan and possible alternatives, I'm sure I can be of service in helping you find exactly what you need.

Henry

 Henry,

Henry,

Thanks for your response. I would love to network with you and check out some of the properties you have in mind. Shoot me a pm with your contact information and we can get the ball rolling. 

Thanks again,

Jerad Miller  

@Henry Omenai
I am also interested sounds like you got some good deals. PM me so we can discuss, looking to buy another one soon.
Thanks,
Nick

Originally posted by @Jerad Miller :
Originally posted by @Federico Gutierrez:

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

 Federico, 

You bring up some very valid points. The only reason I have behind going with the distressed 10-20k properties is that is pretty much what we have to start our investment with. We have about 35k but I don't want to blow through all of that. I want to have some reserves left over. I know the areas aren't the best, I grew up in Brunswick, so I've been in the area my entire life. So right now I'm kind of torn on what to do and where to start. 

 If you have $35k cash there are much better ways to spend it then buying a dog of a property in the ghetto. That is a hard way to earn money my friend, the return is just not there for the risk you need to take.

Simply take your $35k and use it as a down payment on a $140,000 duplex or two $70,000 duplexes. I assure you that is the better path towards success. There is NOTHING in the Cleveland area selling for $10k that I would want to own. Couple years ago, during the crash yes opportunity was there but now all your looking at is scraps.

Originally posted by @James Wise :
Originally posted by @Jerad Miller:
Originally posted by @Federico Gutierrez:

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

 Federico, 

You bring up some very valid points. The only reason I have behind going with the distressed 10-20k properties is that is pretty much what we have to start our investment with. We have about 35k but I don't want to blow through all of that. I want to have some reserves left over. I know the areas aren't the best, I grew up in Brunswick, so I've been in the area my entire life. So right now I'm kind of torn on what to do and where to start. 

 If you have $35k cash there are much better ways to spend it then buying a dog of a property in the ghetto. That is a hard way to earn money my friend, the risk your taking is just not there.

Simply take your $35k and use it as a down payment on a $140,000 duplex or two $70,000 duplexes. I assure you that is the better path towards success. There is NOTHING in the Cleveland area selling for $10k that I would want to own. Couple years ago, during the crash yes opportunity was there but now all your looking at is scraps.

James,

If I were to take the 35k and invest it in the way you had described with the duplexes how then would I go about building my business after? Unless you are meaning that I still buy a property that needs rehabbed and will appraise higher therefore I can refinance and get cash out? I don't want to lock up all my capital in one or two properties. I would like to grow at a steady rate for as long as possible. 

Thanks

@Jerad Miller , you should believe that, whether you buy a $10k property OR use the $35k as a deposit on one or two duplexes - you will at that stage have NO more cash left over to help you scale your investments further. You WILL be forced to use all of it to keep the purchase/s rentable.

To keep your business going EITHER WAY, you will need to keep saving, AND make sure that each purchase is ALREADY worth significantly more than what you paid for it. (Easier said than done).

eg. If you buy a property for $10k, are you suggesting it WON'T need another $25k for rehab?

And/or, are you suggesting that it's ALREADY worth $35k as-is to a different buyer? (If so, kudos)...

Originally posted by @Brent Coombs :

@Jerad Miller, you should believe that, whether you buy a $10k property OR use the $35k as a deposit on one or two duplexes - you will at that stage have NO more cash left over to help you scale your investments further. You WILL be forced to use all of it to keep the purchase/s rentable.

To keep your business going EITHER WAY, you will need to keep saving, AND make sure that each purchase is ALREADY worth significantly more than what you paid for it. (Easier said than done).

eg. If you buy a property for $10k, are you suggesting it WON'T need another $25k for rehab?

And/or, are you suggesting that it's ALREADY worth $35k as-is to a different buyer? (If so, kudos)...

Brent,

My initial plan was to buy a duplex for cash, say in the 15k range. Use about 10k for renovation. Most of which will all be done by myself to cut costs. Therefore I would have 25k all in on the property with 10k left in reserves. After the rehab and getting it fully occupied I would hope that it would appraise high enough to do a cash out refi and start the process over while retaining the original property and collecting the rent from it. My original concern and reason for starting this thread was to see if it is feasible in the cleveland and Akron markets. I want to be sure I can refinance and get a higher valuation at appraisal. 

@Jerad Miller , it is indeed a necessary step "to be sure I can refinance and get a higher valuation at appraisal", but, will a $10k rehab on a $15k property REALLY mean that it will suddenly appraise at more than $50k? It's more likely that your $15k buy is in an area where there are many similar!

I have seen it happen that the ONLY difference between the purchase purchase price and the subsequent rehab is the ability for it to be then be rented out (and the next appraisal MAY have improved by the amount of the rehab cost) ie. there's NO increased equity!

James was likely suggesting that REAL forced-equity will be in areas where the comps are closer to $100k or above - but you might still find fixer-upper "deals" for REAL bargain prices. Cheers...

Originally posted by @Jerad Miller :
Originally posted by @James Wise:
Originally posted by @Jerad Miller:
Originally posted by @Federico Gutierrez:

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

 Federico, 

You bring up some very valid points. The only reason I have behind going with the distressed 10-20k properties is that is pretty much what we have to start our investment with. We have about 35k but I don't want to blow through all of that. I want to have some reserves left over. I know the areas aren't the best, I grew up in Brunswick, so I've been in the area my entire life. So right now I'm kind of torn on what to do and where to start. 

 If you have $35k cash there are much better ways to spend it then buying a dog of a property in the ghetto. That is a hard way to earn money my friend, the risk your taking is just not there.

Simply take your $35k and use it as a down payment on a $140,000 duplex or two $70,000 duplexes. I assure you that is the better path towards success. There is NOTHING in the Cleveland area selling for $10k that I would want to own. Couple years ago, during the crash yes opportunity was there but now all your looking at is scraps.

James,

If I were to take the 35k and invest it in the way you had described with the duplexes how then would I go about building my business after? Unless you are meaning that I still buy a property that needs rehabbed and will appraise higher therefore I can refinance and get cash out? I don't want to lock up all my capital in one or two properties. I would like to grow at a steady rate for as long as possible. 

Thanks

 You have to park money in this business. End of story. Anyone telling you differently wants you to buy their book or pay for a coaching class of some sort.

Rental properties are about parking excess capital that you need to do something with so that you can achieve the highest possible return on those dollars. The idea that you can take a small chunk of change and use it to quickly grow a rental portfolio that replaces all of your other income sources is pie in the sky my man. You need to let go of that dream today.

I own well over 100 properties and wouldn't want to attempt to live off that cash flow. If you are leveraged on properties it's really not that much money. The real value is that almost every time you buy a rental property you are quadrupling your net worth.

You take your $35k & buy $140,000 worth of property and rent them out. When your mortgage is paid off you now have a $140,000 property but you never paid $140,000 for it. The tenants paid for it for you. This is the core reason you invest in real estate. 

Along the way you will get other benefits such as depreciation, market appreciation etc. but do not loose focus on why you should buy real estate. No money down books are not written for any reason other then to make the author money. 

Answer this question for me 

"If you knew how to make all this rental income without the need for additional capital to invest, why in the world would you tell the general public about it? Wouldn't you simply buy every property in the world?"

Park your $35k into the best possible assets you can. Continue earning income to save up more capital then invest said capital into the best possible assets you can. Keep on repeating. 

If you want to speed up the process you need to figure out a way to generate more income now. For me that process involved starting HoltonWise to generate income now. My business partner John & I bought all the property we could with our existing capital and then we had to figure out the answer to this question. "Now what?"

Originally posted by @James Wise :
Originally posted by @Jerad Miller:
Originally posted by @James Wise:
Originally posted by @Jerad Miller:
Originally posted by @Federico Gutierrez:

Does anyone every take time to consider just how much rehab a 10-20K property requires?
Not to mention these are rough neighborhoods. Even if you fix it up I can bet your going to face on going issues. My main concern is you'll probably get broken into during the project and have things stolen.

You will find that your going to get very bottom of the barrel properties which require a lot of money, so refinancing them you've still got a large percentage of capital tied into their even at 70% of the ARV. Plus still remember your in a bad area so thats capital you may not recover should something go wrong down the line.

 Federico, 

You bring up some very valid points. The only reason I have behind going with the distressed 10-20k properties is that is pretty much what we have to start our investment with. We have about 35k but I don't want to blow through all of that. I want to have some reserves left over. I know the areas aren't the best, I grew up in Brunswick, so I've been in the area my entire life. So right now I'm kind of torn on what to do and where to start. 

 If you have $35k cash there are much better ways to spend it then buying a dog of a property in the ghetto. That is a hard way to earn money my friend, the risk your taking is just not there.

Simply take your $35k and use it as a down payment on a $140,000 duplex or two $70,000 duplexes. I assure you that is the better path towards success. There is NOTHING in the Cleveland area selling for $10k that I would want to own. Couple years ago, during the crash yes opportunity was there but now all your looking at is scraps.

James,

If I were to take the 35k and invest it in the way you had described with the duplexes how then would I go about building my business after? Unless you are meaning that I still buy a property that needs rehabbed and will appraise higher therefore I can refinance and get cash out? I don't want to lock up all my capital in one or two properties. I would like to grow at a steady rate for as long as possible. 

Thanks

 You have to park money in this business. End of story. Anyone telling you differently wants you to buy their book or pay for a coaching class of some sort.

Rental properties are about parking excess capital that you need to do something with so that you can achieve the highest possible return on those dollars. The idea that you can take a small chunk of change and use it to quickly grow a rental portfolio that replaces all of your other income sources is pie in the sky my man. You need to let go of that dream today.

I own well over 100 properties and wouldn't want to attempt to live off that cash flow. If you are leveraged on properties it's really not that much money. The real value is that almost every time you buy a rental property you are quadrupling your net worth.

You take your $35k & buy $140,000 worth of property and rent them out. When your mortgage is paid off you now have a $140,000 property but you never paid $140,000 for it. The tenants paid for it for you. This is the core reason you invest in real estate. 

Along the way you will get other benefits such as depreciation, market appreciation etc. but do not loose focus on why you should buy real estate. No money down books are not written for any reason other then to make the author money. 

Answer this question for me 

"If you knew how to make all this rental income without the need for additional capital to invest, why in the world would you tell the general public about it? Wouldn't you simply buy every property in the world?"

Park your $35k into the best possible assets you can. Continue earning income to save up more capital then invest said capital into the best possible assets you can. Keep on repeating. 

If you want to speed up the process you need to figure out a way to generate more income now. For me that process involved starting HoltonWise to generate income now. My business partner John & I bought all the property we could with our existing capital and then we had to figure out the answer to this question. "Now what?"

 James,

Thank you very much for your input. Everything you described seems to be the reality of this business. It looks like I will be going with my original plan which is flipping and using profit to buy multi family properties. Going this route I would definitely buy multis that are in need of light rehab in good neighborhoods. I think this way I can sustain a steady growth of 1-2 multi families a year. Im currently 26 and bought my personal residence at 22. I have a decent amount of equity and should be able to pay off by the time I'm 40. Hopefully gaining a couple rentals a year plus flipping i should be able to retire at a decent age. Atleast thats the plan!

@Jerad Miller It seems you have an advantage starting out in that you and your father in law can do most of the work and then you already have a contractor you can trust who can not only give you advice but do work you can't. Sound like a great situation. That is a great starting point. My thought as I was reading through this thread is that you should start out flipping. Leverage what you have, buy in the best neighborhood you can, flip it and build your reserves. Use the profit for buy and holds.
Wishing you great sucess!

Hi everyone, 

Thanks for your comments. I am in a similar situation in that I have limited funds to get started and my target market is Akron/Cleveland. Based on this thread, flips may be the way to go, but does anyone know how profitable/success flips can be in that market?

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