Interested in a tri-plex in Cleveland, Ohio

[Phillip Gasper]

Hello Everyone,

I am currently a teacher in the Cleveland, Ohio area looking to invest in a triplex. My plan is to live in the smallest unit and rent out the other two so I can get a FHA loan. This will be my first home purchase and I want to make it a good one. I am new to investment real estate and have been studying it endlessly for the past two months.

Any advice for a rookie? 

Thank you,

[Andrew Weiner]

Hi Phillip,

Here are a couple of thoughts as another native Clevelander and investor.

1.  Make sure that you are clear on what your goal and time line for the investment are.  Is this a 2 year play and then you move on to a single-family and keep this as an investment, or do you plan to maintain this long term?  I am very big on being intentional with the plan and speaking it out up front. If you try to do too much, you might not be able to find the right property.  

2.  When living in one while renting the other two, it will be hard to cause any real damage.  Your personal comfort and being in a neighborhood that you want to be in will be more important than overall cash flow/return.

3.  Make sure that the area that you are in will attract the kinds of tenants that you want as neighbors.  Being in the same building as your tenants can make things like charging late fees and addressing neighbor-to-neighbor disputes challenging.  I have a friend that had a tenant in this situation who wouldn't walk away from his front door until he agreed to drop the late charge.

4.  Be ready with a maintenance plan.  Issues will come up; heat/AC, hot water heater, etc.  This is where being an independent manager can be difficult. The management companies have staff and commercial accounts, and can buy labor and material much cheaper than you can.

5.  I have recently become more of a fan of having a third party management company.  They do cost, but they tend to demand higher rents and have the will to hold out for them (I caved a few times and left a lot of money on the table). Tracking down some of the maintenance vendors became such a headache and took me away from my day job, that it was worth it to hire a third-party management company, rather than have to deal with the unexpected.  Depending on where you are in Cleveland, there are lots of options for management companies. Some will even help you get your house and might prevent you from making some mistakes. 

Personally, I would recommend USA Property Management in Beachwood.  They can advise on potential deals while you are looking and will give you some market insight for free.  

Good luck to you!