I'm taking a field trip to Cleveland!

Buying & Selling Real Estate
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I'm taking a field trip to Cleveland!

Ryan Evans
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes

A lot of eyes are on the midwest these days so I thought I’d put an offer out there for all the BP folks around the country who have their eye on Cleveland, Ohio.

I've personally placed a major bet on Cleveland as an upcoming city for long term buy-and-holds and I have plenty of reasons why. I've got a duplex running a 44% ROI and another ~24%'er on the way. It's a duplex closing on Sep 5. I live in the Seattle/Tacoma area so I'm doing the whole out of state thing.

Anyway, I see a lot of interest in Cleveland, Akron, Toledo, Columbus, Cincinnati, etc. (sorry for keyword spam!), here in the forums, but the Midwest can be a risky place to invest. Not everyone has the capacity to fly out to every city they want to invest in, but some questions can only be answered by being on the ground.

So, if that’s you, maybe I can help! I’m flying to Cleveland from Sep 5-10th to get keys, fix the new place up, look at some properties, grow the team, and generally get the place rent ready. The ugly details are where the real learning happens so if you want to know about the deal, agents, contractors, taxes, regulations, contracts, financials, etc., while I go through the process, I’m happy to share my experience. I’ll be sure to document the process and post it on BP. I’ll also be bringing my best friend out from Alaska. He’s never set foot in Ohio or even bought a property but is looking at investing in Cleveland. Maybe you can relate?

Anyway, the BP community has helped me a ton, so here’s my chance to build up some good karma. If you want to know what it’s like to be a new out of state investor buying a property in the midwest, I invite you along for the ride :)

A year ago I was totally new to investing, but I’m slowly getting it figured out. Leave a comment or send a PM if you have any questions on what it’s like to do a deal out in the Cleve. If you like what you see and might want to talk partnerships, I’m all ears. Also, if you don’t have any local contacts out there and there is something we can do to help while we’re in town, don’t be shy!

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Michael Swan
Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
9y

Thank you @Ian Kurela

Anybody can do it if I can do it.  $80,000 combined family income here!!  I worked 60 hours a week for the last 10 years to achieve this.  If you live like no one else now, you can live like no one else later.  Get a great job, make a lot more w2 earned income than my family makes, invest in assets that put tax deferred cash flow in your pocket every month.  Stop contributing more than what your company will match in the 401K, get rid of those car payments, student loans, toys bought on time etc... Hoard  a lot of cash in a money market fund and build your financial freedom account up to capitalize on opportunities to buy more assets that put tax deferred cash flow in your pocket every month and you will be way above my $160,000 primarily tax deferred cash flow per year.  If you  don't make enough W2 earned income than get a part time job and hyper save for more assets.

YOU CAN DO IT!!!

Swanny 

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  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    9y

    Funny @Account Closed.  Keep learning!!!

    Swanny

    0Reply
  • Scott Hamilton
    Investor · Marysville, OH · Member since 2017 · 39 posts · 12 votes
    9y

    Great thread; I have been on BP and in learning mode the past eight months and have pulled the trigger on a 4-unit in the Cleveland region; it will be my first investment property....my decision was influenced by some on this thread. For me it is only a 2-3 hour drive so it's reasonably easy to visit; I also have used the destination to get some needed flight hours as a private pilot. It has also been an opportunity to meet some local investors there.....learning every day!

    1Reply
  • Ty L.
    Investor · Northern Virginia · Member since 2017 · 159 posts · 59 votes
    9y

    Good luck with your trip.  Keep us posted on what you discover.

    1Reply
  • Ryan Evans
    OP
    Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    9y

    Awesome to hear how many people are seeing the potential of the Cleveland area!

    @Account Closed congrats on pulling the trigger. That's sometimes the hardest part! If you're passing through this week, you'll have to let me know so we can talk some real estate. 

    0Reply
  • Tony Willenborg
    Investor · Champaign, IL · Member since 2016 · 3 posts · 0 votes
    9y

    I am very interested in your experience.  I will be following. 

    0Reply
  • Linda LabbePro Member
    Investor · North Bay, Ontario · Member since 2015 · 709 posts · 262 votes
    9y

    I love investing in Ohio  its a great market thought do more in Toledo then Cleveland take regular trips there over the years have built great teams on the ground  which makes all the difference.. recently expanded to Kansas city  and am happy there to but teams on the ground that you can trust is the key to doing out of area investing

    0Reply
  • Ty L.
    Investor · Northern Virginia · Member since 2017 · 159 posts · 59 votes
    9y

    @Scott Hamilton Congrats on your first investment property.

    0Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y
    Originally posted by @Michael Rodriguez:

    Michael Swan send me your stinker properties in Heights so I can avoid them -;) and thanks for sharing your problems with them. I'm avoiding those parking problem MF properties on my search.

    I'd love to see any MF in Cleveland or Akron with double digits NOI....really.

    Unless you don't count management and maintenance. They are good only because of financing but twice less cash flow than SFR or condos.

    Definitely will follow and see how you guys can make it work!

    Good luck!

    0Reply
  • Rob Gillespie
    Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
    9y

    Over 20 years and over 1000 deals in the Cleveland market. Connect with me on here and swing by my office. I am sure I can shed some light on the Good, Bad and Ugly of the North East Ohio market.

    Have a safe trip!!! :-)

    0Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y
    Irina Belkofer , Condos or SFH have twice the cash flow as Multis in Cleveland ? That is especially interesting to hear about condos. I can see the advantages of condos especially for out of state investing but it seems HOA and special assessments can often kill cash flow , and I know many have restrictions on renting . Could you post an example of a condo deal? Thanks
    0Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y
    Originally posted by @Joseph M.:

    Irina Belkofer , Condos or SFH have twice the cash flow as Multis in Cleveland ? That is especially interesting to hear about condos. I can see the advantages of condos especially for out of state investing but it seems HOA and special assessments can often kill cash flow , and I know many have restrictions on renting .
    Could you post an example of a condo deal? Thanks

    True about restriction on the renting - but I assume you're working with a local agent, who knows the developments which you can rent. There are plenty of these.

    For out of state investors it's very beneficial to buy condos because the exterior Cap exp included in HOA (roof, driveways, sometimes even A/C units outside the wall).

    Let's take a real example: I'm renting a condo 2bed/1.5bath for $925/mo right now - it's listed yesterday.

    The owner bought it for $17K, invested $5K - new cabinets, flooring, HVAC, HWT, paint. Total $22K

    HOA-$179/mo, taxes $67/mo (still can be lowered to $50-55). He will pay management and bookkeeping $150/mo, so his cash flow $529. There will be insurance $13/mo and POS from city $17/mo.

    Let's say $500/mo make it $6K/year. His return 27.2% per year before taxes. Maintenance is highly unlikely because it just been renovated and vacancy in this particular location pretty low. Price should be $890 since the unit doesn't have washer/dryer but it's the only rental in this development right now and I expect to rent it as soon as I get the rental permit from the city.

    Now, a house SFR at the same city (not hood or ghetto - just decent location like an example above). Since I don't have currently a rental, just coming soon - let's take these numbers.

    Price was $53K, updates will about $25-30K at least (no roof or driveway though). Let's say all together $85K.

    Rent will be $1400/mo, insurance $75/mo, taxes $257/mo. City inspection $17/mo. This client does property management by himself but will pay to find a tenant - one month rent. Usually it's 2 year lease - $59/mo

    $990/mo = $11880/year

    So, this one gets only 14% per year and he has to save CapEx for roof (it's a ranch) and other exterior covered by HOA in my first example.

    Third example I'll take from MLS - MF. There is one right now contingent - I'll get the numbers right now....

    Price-$350K, but don't know what it'll closed at. 8 units, 6 - 2bed, two - 1bedroom. Total gross rent was $51840 in 2011, not disclosed now. I'd mark up just alittle bit because it must be not updated to raise the rent...let's say now it's $55K

    Taxes $11388/year, insurance could be $3K easy - it's a free standing building.

    16 parking spaces, lot 0.45 acres. Water, sewer, trash - on the owners, tenants pay electric and gas.

    Judging by the rental price per unit in 2011 ($540/mo per unit) it has a lot of deferred maintenance. Location can support price of $700-720 per unit if updated. 

    So, let's count in present condition: let's say water/sewer $3500/year (Cleveland water charge double from the buildings and these units won't be metered separately). Taxes $11.4K, insurance $3k.

    Management - at least 8% but might be 10% if it's the only building - and not mane PM will take on that kind of tenants. - say $5K/year. You bet you'll have maintenance in that type of the property and obviously will need capital expenses.

    However, let's count before these: $55K - $22.9K=$32.1K.

    Even before maintenance and capex it's 9.1%.

    The only advantage of this type is financing - banks will base the decision on the collateral and not apply the residential standards (more than 5units).

    SFR is better for financing after repairs - 75% LTV where V - ARV

    Condos won't be refinanced - you have to have cash.

    6Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y

    @Irina Belkofer, thank you for the detailed post and breakdowns. It does sound like there could be a good opportunity with condos there. Looking on the public sites at least , Zillow etc I don't really see much under $20,000 for condos..but I guess if you keep looking they pop up. What area is the $17k condo that you mentioned?

    Regarding financing if you pay cash you can't get a cash out loan/refinance later on?

    0Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    not on a condo - they are not lendable, at least not in that price range

    There are condos for $200-300K, these can be financed with conventional as primary residence, but these won't cash flowing.

    My examples are not on MLS - it's not retail price.

    There are condos for $20K in Shaker Hts but you can't rent them and HOA = $600-900/mo which includes all utilities. These are good only for living, not as income properties.

    Zillow is not the place to look. At least Realtor.com - they feed the properties from MLS and are real.

    All FSBO sites are overpriced, Craigslist full of scammers. Get an agent - local to where you buy. West and East suburbs of Cleveland are very different, like different cities. I can not tell anything about West side: all my examples are from East. However, I know that there are very good returns on West and south of Cleveland.

    2Reply
  • Adrian Cavlan
    Santa Cruz, CA · Member since 2017 · 1 post · 2 votes
    9y

    Brand-newbie (first post!) from Santa Cruz, CA here. Head spinning - loving all this & very inspired by you all. 

    Getting my glossary together and my knowledge as sharp as I can before jumping in. 

    I am excited to see how open everyone on this thread is and I may well reach out to one or more of you in the near future.  

    Best of luck to you all - Adrian

    2Reply
  • Account Closed
    Euguene, OR · Member since 2017 · 7 posts · 5 votes
    9y

    Interested to hear about your experience, thanks.

    0Reply
  • Philippe Busque
    Investor · Saint Nicolas, Québec · Member since 2016 · 53 posts · 20 votes
    9y

    Reading this thread is inspiring.. and frustrating. It's amazing what you guys consider low cashflow, here in canada, 100$/m cashflow a door is unheard of in 2017, 50 a door you are crushing it and that is with 25% down, don't even think about putting 10% down and cashflowing in residential, lmao.

    Our tenants are overall much easier to manage tought, but at what cost!? 

    Very eye opening discussion, I wish the best of luck to you guys.

    0Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Irina Belkofer:
    Originally posted by @Joseph M.:

    Irina Belkofer , Condos or SFH have twice the cash flow as Multis in Cleveland ? That is especially interesting to hear about condos. I can see the advantages of condos especially for out of state investing but it seems HOA and special assessments can often kill cash flow , and I know many have restrictions on renting .
    Could you post an example of a condo deal? Thanks

    True about restriction on the renting - but I assume you're working with a local agent, who knows the developments which you can rent. There are plenty of these.

    For out of state investors it's very beneficial to buy condos because the exterior Cap exp included in HOA (roof, driveways, sometimes even A/C units outside the wall).

    Let's take a real example: I'm renting a condo 2bed/1.5bath for $925/mo right now - it's listed yesterday.

    The owner bought it for $17K, invested $5K - new cabinets, flooring, HVAC, HWT, paint. Total $22K

    HOA-$179/mo, taxes $67/mo (still can be lowered to $50-55). He will pay management and bookkeeping $150/mo, so his cash flow $529. There will be insurance $13/mo and POS from city $17/mo.

    Let's say $500/mo make it $6K/year. His return 27.2% per year before taxes. Maintenance is highly unlikely because it just been renovated and vacancy in this particular location pretty low. Price should be $890 since the unit doesn't have washer/dryer but it's the only rental in this development right now and I expect to rent it as soon as I get the rental permit from the city.

    Now, a house SFR at the same city (not hood or ghetto - just decent location like an example above). Since I don't have currently a rental, just coming soon - let's take these numbers.

    Price was $53K, updates will about $25-30K at least (no roof or driveway though). Let's say all together $85K.

    Rent will be $1400/mo, insurance $75/mo, taxes $257/mo. City inspection $17/mo. This client does property management by himself but will pay to find a tenant - one month rent. Usually it's 2 year lease - $59/mo

    $990/mo = $11880/year

    So, this one gets only 14% per year and he has to save CapEx for roof (it's a ranch) and other exterior covered by HOA in my first example.

    Third example I'll take from MLS - MF. There is one right now contingent - I'll get the numbers right now....

    Price-$350K, but don't know what it'll closed at. 8 units, 6 - 2bed, two - 1bedroom. Total gross rent was $51840 in 2011, not disclosed now. I'd mark up just alittle bit because it must be not updated to raise the rent...let's say now it's $55K

    Taxes $11388/year, insurance could be $3K easy - it's a free standing building.

    16 parking spaces, lot 0.45 acres. Water, sewer, trash - on the owners, tenants pay electric and gas.

    Judging by the rental price per unit in 2011 ($540/mo per unit) it has a lot of deferred maintenance. Location can support price of $700-720 per unit if updated. 

    So, let's count in present condition: let's say water/sewer $3500/year (Cleveland water charge double from the buildings and these units won't be metered separately). Taxes $11.4K, insurance $3k.

    Management - at least 8% but might be 10% if it's the only building - and not mane PM will take on that kind of tenants. - say $5K/year. You bet you'll have maintenance in that type of the property and obviously will need capital expenses.

    However, let's count before these: $55K - $22.9K=$32.1K.

    Even before maintenance and capex it's 9.1%.

    The only advantage of this type is financing - banks will base the decision on the collateral and not apply the residential standards (more than 5units).

    SFR is better for financing after repairs - 75% LTV where V - ARV

    Condos won't be refinanced - you have to have cash.

     THIS is what I love to see

    Thank you 

    1Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    @Michael Plante if you're in Cleveland, let me know. I can spend couple hours to educate you on some good location in East suburbs and some south burbs - you might find something interesting besides these examples. We still have quite few deals for B&H.

    I know quite few people here who are doing business in Florida (Orlando). You might collaborate ;)

    1Reply
  • John Collins
    Investor · Denver, CO · Member since 2015 · 49 posts · 24 votes
    9y

    Irina ,best quick and dirty analysis I've seen on Cleveland .Certainly seems like pretty hot market there at the moment .Then again all MSA seem to be hot right now .Conventional wisdom about no appreciation in mid west cities is passé at least at the moment .

    Thanks

    1Reply
  • Ryan Evans
    OP
    Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    9y

    Alright folks, we're 24 hours on the ground in Cleveland. I'll try to do some posts as I go to keep everyone updated as we go, but I'll do a full breakdown when I head back home. But here is update number 1 on the day in the life of an out of state investor showing up to a duplex bought sight unseen. Here goes.

    Landed about 7 am local time, or 4 am my time. Slept about 3 hours on the plane, so we're off to a good start! To recap, I flew out my friend, an electrician/handyman to help with the rehab work, hence the "we." All the paperwork and money was submitted by Friday, but with the 4th being a holiday, we closed on 9/5, the day I arrived. After some breakfast in downtown, I was picked up by my real estate agent/friend to check out the property. We called the title company first thing and found out the transfer won't happen until 4pm. Not surprising, but now a day is wasted waiting around and running errands. However, my agent is an absolute legend and let me use her car for the day.

    Got the keys around 4, and game planned a bit, and pretty much called it a day. No major surprises with the place that I didn't know about in the inspection report. There are a few more cosmetic issues that I'll need to deal with, but probably no more than $500 worth of materials and labor. 

    Started fresh this morning with a tour of the new place and a great meeting with @Michael Rodriguez who's in town from Denver doing some shopping for apartment complexes. 

    Just got back from spending $1,009 on new light fixtures, door knobs, and electrical gear. Now time to get to work. And if you want to look up the stats on the property, you should be able to find it from the street signs in the photo :) That's all for now...

    Here are a couple photos of what I'm up against.

    3Reply
  • Account Closed
    San Francisco, CA · Member since 2017 · 56 posts · 23 votes
    9y

    @Ryan Evans

    You guys camping in the house while you are Cle?

    0Reply
  • Ryan Evans
    OP
    Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    9y

    @Account Closed Yes sir. Living the life of luxury! 

    2Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    @Ryan Evans congratulations!

    Hope to read your numbers: cost of repairs, projected rent, etc

    Good luck with the project!

    0Reply
  • Brandon Benson
    Irvine, CA · Member since 2017 · 9 posts · 4 votes
    9y

    @Ryan Evans - Love the air mattress, I assume this is your life of luxury currently!

    Following to see how it goes.

    0Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y

    @Ryan Evans , thanks for posting. It looks like a nice duplex, I did a little detective work from the photo you posted and looked up the listing. Looks like you got it for a decent amount below list price too which is great. 

    Sleeping in the duplex, nice , like a 'free' Airbnb. 

    Look forward to hearing more about the property and trip. 

    You should check out some of these places to eat while there. Sounds like a bunch of new restaurants and breweries have opened in Cleveland recently. 

    https://www.eater.com/maps/best-new-restaurants-cl...

    Great, now i'm hungry..

    0Reply
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