inexpensive multifamily markets with strong rental cashflow

30 Replies

@Joanna Golden

I have done some minor research during my leisure times and I found that towns in the state of Ohio would easily fit the criteria you are looking for. Towns like Toledo, Cleveland and Cincinnati have some beautiful multifamily that I am just drooling over. Other towns like Indianapolis and Milwaukee have some beauties as well. However, I would make Milwaukee my last potential due to the reported increase in crime in that area.

Originally posted by @Joanna Golden :

What would you say the best U.S markets are currently to buy multifamily units under 40K with strong cashflow/rental markets?

 Hi Joanna, have you looked at Columbus and Cincinnati Ohio? With The Ohio State University graduating 6000+ students a year, the tax incentives that are bringing and keeping a lot of big business in Columbus, there's no shortage of need for multifamily housing.  A lot of investors are looking at Cincinnati as the returns are great, prices are good and there are still fantastic deals to be had in both cities.  

Originally posted by @Joanna Golden :

What would you say the best U.S markets are currently to buy multifamily units under 40K with strong cashflow/rental markets?

 In 2013 there was decent multi family cash flow opportunities under $40k. That period is over though. Here in 2018 the market has rebounded. Any multi family that is priced under $40k will be in a distressed or high risk neighborhood. If that's what you are into there are ton of high risk D class opportunities in Cleveland.

@Joanna Golden

That's the big question of the day!  

The best U.S. markets are the ones where you can build a solid team around so you can maintain and grow the asset purchased.  As far as price points, that would be second on the list because you can buy cheap all day and everyday but if it's in bad areas or you do not have a good property manager, it's not going to be in your favor regardless of price.

Hope you have a ton of these because you're going to need a pretty good multipler on the cash flow to make up for it he disaster turnovers that are going to happen at some point.

In other words you're going to lose money with one bad turnover when you have to do repairs that exceed rents collected.

@Joanna Golden @Brian Adzadi

Brian in reference to Milwaukee (I am no expert by any means) not all of Milwaukee is crime ridden. Now if you are looking in areas where properties are selling for $40K and under you will most likely be in crime ridden areas. If cash flow is all you are concerned with then this may be for you but keep in mind you will most likely have a not so great tenant. 

Joanna I hope this helps. 

All the best to you both,

Jorge

@Joanna Golden "best" is a relative term. At $40K, they most definitely should cash flow, but they would be in disrepair, high turn-over, and high maintenance. These properties exist, but will need a lot of cash invested for renovations up front, which will add value and warrant increased rents. There would be a limit on the rent based on the neighborhood. Memphis comes to mind, but you would need to live there and manage the renovations yourself, as good help is hard to find. 

Hey @Joanna Golden great question. I guess where I invest in rochester NY market fits your search well. Like some of the others have mentioned that market does have high turn over and the maintenance can run high but if you have enough units, it can be very lucrative. You would also need to have a strong tolerance dealing with tenants who can be very needy. I don’t mind - they are making me money and paying down my liens.

@Joanna Golden I would re-word the question. You are basically asking for the most popular thing that nobody wants. I think what you are looking for is a good rental market, with moderate prices. And within that market you will be looking for a good deal.

However, the price you are looking for will point you to areas with:

- negative population growth

- high unemplyment

- high crime

- poor infrasatructure 

- poor property condition

That's why they are cheap, nobody would pay more.

If you want some of these to be more positive you will pay more than 40k a unit. Once you start looking at the bottom line and bigger picture over a 10 or 20 year life span you will quickly see that a quality investement will serve you better.

@Joanna Golden

Cleveland! I am obviously bias because it is my market, but to get a double for 40k that brings in over a grand per month is not bad!

As for everyone that says "high risk" or "bad neighborhoods".  every business deal is a risk. people come to Cleveland for low purchase price and high rents. When you move into the burbs, the numbers are just not as sexy. The investor can buy in his/her own back yard at that point. 

last 4 evictions I have had. 

Sheffield lake- beat up my  house and was a pain to deal with

Avon lake- beat up my house and was a pain to deal with

North Olmsted- beat up my house and was a pain to deal with

 Cleveland (east side "war zone" as some would call it)- had car accident, came to court crying and apologizing and paid all of her back rent 3 days later 

So my point is. everything has risk, just know what you are buying and run it according to where it is located.

Hope that helps, and I am sure I will get some arguments on this one, LOL

P.S. I am not speaking from a place of reading about statistics, I am speaking from over 2 decades of dealing  with hundreds of tenants in what some may call "The Hood"

@Rob Gillespie  Even though you have problems in the suburbs as well, can you say that East CLE gives you more problems? I only have investment properties in Lakewood but would assume that you have more problems in East CLE, even though I'm well aware they can happen anywhere. 

Do you self-manage your properties?

@Rich Rodman I will relate it to flying. You need to look at the number of hours of private flight vs. the number of crashes. Then the same with the automobile. 

My point is, I honestly have more problems on stuff on the east side of Cleveland than I do in the burbs, but that is because I have a TON more houses there. 

With all things equal, they both have their pros and cons. 

I do a Hybrid management system. I never think it is a good idea to give any company complete control of your portfolio. 

As a side note, the city of EAST CLEVELAND  is VERY different than the EAST SIDE of CLEVELAND.   I do not deal in the "Republic of East Cleveland" Too many issues for ANYONE!

Hope that helps a little

Originally posted by @Rich Rodman :

@Rob Gillespie  Even though you have problems in the suburbs as well, can you say that East CLE gives you more problems? I only have investment properties in Lakewood but would assume that you have more problems in East CLE, even though I'm well aware they can happen anywhere. 

Do you self-manage your properties?

 It is highly irresponsible to claim that the eastern part of the city of Cleveland isn't a riskier neighborhood than Avon Lake or North Olmsted. If anyone has any doubts on that simply do a google search of household income by zip codes. 

  • Avon Lake---Median income $82k---(zip: 44012)
  • North Olmsted---Median income $60k---(zip: 44070)
  • Cleveland---Median income $22k---(zip: 44106)
  • Cleveland---Median income $21k---(zip: 44110)
  • Cleveland---Median income $20k---(zip: 44108)
  • Cleveland---Median income $20k---(zip: 44114)
  • Cleveland---Median income $19k---(zip: 44127)
  • Cleveland---Median income $17k---(zip: 44103)
  • Cleveland---Median income $14k---(zip: 44104)
  • Cleveland---Median income $12k---(zip: 44115)

@Rich Rodman ,

@James Wise  

I believe it is highly irresponsible to blindly turn a property over to a management company and just hope for the best regardless of the neighborhood. 

It is easy to hide behind neighborhood  statistics to mask poor management. 

I would NEVER just turn over a property over to a management company and not be involved. 

I have success in those areas because I am involved with decisions and managing my boots on the ground.

They will not run if a management company is hands off. Evictions will be through the roof. 

I deal with investors from all over the world. I meet some of them when they are just starting out and others come to me with 100 house portfolio. 

 The common denominator for the ones that are happy and making money, is that they are involved in managing their properties. At the very least they have their managers on a short string and are staying on top of them. 

The investors that are fed up and ready to sell are ALWAYS with a "professional" management company. 

This is true EVERYWHERE, not just on the "war zones".

With that said, yes James is correct that there is more risk in low income areas, but the rewards are worth it in my opinion. 

As for crime and fear of going there, my son started buying in those areas at 13 because they are affordable with high returns, and yes, he is involved in his own management too. 

I am finished with my rant now, LOL

@Joanna Golden Cleveland is the best overall rental market in the country , ranked by Forbes the last two years in a row, really the last 8 but they were not paying attention. MF for 40k or less, NO MORE, impossible for YOU.  IMO, unless you want to be in a " war zone" and you will only get a duplex, MAYBE triplex, . Even 3 years ago, it would only be a duplex, or triplex in OK area.   This week I am closing on a 4 unit, W 90'S  will net about 19k on gross of about 32k, , , 3 unit, W 100'S  net about 12k, , 21 unit, net about 82k , all in 350k,  Grace Ave Garfield, net about 7500, all in 55k,  , , all the best to everyone, BTW these are MY pricing not clients ,. :) 

@Brian Adzadi you are not going to get a MF unit in Cleveland for 40k or less, in an area you would be proud of. If you do it will only be a duplex, but IMO very difficult.. I could but we do business here , all the best 

Hey fellow Cleveland investors, a piece of advice , Be VERY careful when buying a tax cert from Cuyahoga County !! The county can and will give your property to the land bank if they feel there is an "error in your paperwork" , you can lose your ENTIRE investment .Once they give it to the Land Bank , well consider it gone, or you will have a battle to get it back..  I am in the middle of a law suite, $125k, plus 25k legal fees, They gave the the building to the land bank who gave it to another party. So they keep my money, and the building. Stay tuned. 


Sorry to hear that. what "error in paperwork" did they find in your case?

Originally posted by @Bob Prisco :

Hey fellow Cleveland investors, a piece of advice , Be VERY careful when buying a tax cert from Cuyahoga County !! The county can and will give your property to the land bank if they feel there is an "error in your paperwork" , you can lose your ENTIRE investment .Once they give it to the Land Bank , well consider it gone, or you will have a battle to get it back..  I am in the middle of a law suite, $125k, plus 25k legal fees, They gave the the building to the land bank who gave it to another party. So they keep my money, and the building. Stay tuned. 

@Amy Hu none its all BS, we have done about 100, the Land Bank is extremely corrupt. Why are most of the properties going to the same people, hmmm ? How is it the company that " stole " my property opened the LLC for it BEFORE a decision was made for them to get it ? CORRUPTION. !! Just google the Cleveland land bank you will find tons of suspicious behavior.

Originally posted by @Rob Gillespie :

@Rich Rodman I will relate it to flying. You need to look at the number of hours of private flight vs. the number of crashes. Then the same with the automobile. 

My point is, I honestly have more problems on stuff on the east side of Cleveland than I do in the burbs, but that is because I have a TON more houses there. 

With all things equal, they both have their pros and cons. 

I do a Hybrid management system. I never think it is a good idea to give any company complete control of your portfolio. 

As a side note, the city of EAST CLEVELAND  is VERY different than the EAST SIDE of CLEVELAND.   I do not deal in the "Republic of East Cleveland" Too many issues for ANYONE!

Hope that helps a little

Rob... Where exactly is the Republic of East Cleveland? I looked at a 4plex around Slavic Village and was told it was a very bad area, but being from WA, I'm not sure. My husband and I are looking to buy in NE Ohio. I grew up in Ashtabula, but haven't lived there in many years. I think you and he are on the same page re: cash flow making up for neighborhood, but I'm a Nervous Nellie!

@Tess Robinson The Republic of East Cleveland is just a nickname I made up for the City of East Cleveland. It is its own territory that is not tied with the city of Cleveland. Because of this, it has a failing police and fire department, TONS of vacant properties so no tax revenue. Last year the city lost its ambulance and it was on the news to not call 911 in that city because no one would come. LOL. A neighboring city gave them an ambulance later that day. 

Plus the city has a REALLY BAD point of sale inspection that forces investors to put more money than necessary into places in war zones

As far as Slavic Village, It is not the burbs, but we buy there. Heck my son started buying there art 14 and his first house at 13 was in a worse area than that. With that said, you MUST have good management in place to make it work. 

We buy in all areas good and bad.  You just need to know what you are getting into and manage accordingly. 

Here is a pic of me in the Republic a couple of weeks ago! LOL The ENTIRE STREET IS VACANT!