NE Ohio investment question

10 Replies

I'm currently looking to invest $25-30k in either 2 rental properties or purchase a house and flip it in NE Ohio. Both options I would need to take out a loan. Being new to this I wanted to reach out to see what you guys think.

Thanks
Tony

Hi Tony

I have done 6 flips in the Cleveland area over the past couple of years. It is most important that you carefully define your objectives. Are you are looking to buy a $25K to $30K house to flip, or are you looking to invest $25k to $30k for your down payment and rehab costs?

I have typically done my flips is great school system neighborhoods with a buy price between $50k to $100k. Including the cost of rehab and holding cost, I am getting out with a 35% to 45% ROI. In my case I pay cash, but you can work the additional cost of debt into your calculations.

I am interested in hearing back from you as to your objectives.

Good luck

Bob Collett, Remax Trinity

That's a great question! Cleveland is going through some great real estate times right now! very exciting that your considering NE Ohio @Valerie Couch  

Ok lets get serious, you have $25-30K to spend on a property. You  were from Cleveland (yes I read your profile) so you have an idea what the area is like. You were also a Realtor, is you license still valid (hit me up privately, lets chat about this) so you probably already know some of the suburbs and the average price points.

Now do you have a team in place that will look out for your best interest over theirs while you are in NV? IF NO, then you Buy and Hold. Plus the $25K I'm assuming is just the downpayment, do you have access to additional funds for the cost of the rehab? IF NO, then you buy and hold. 


Looks to me like all roads currently point to Buy and Hold. 

Originally posted by @Federico Gutierrez :

That's a great question! Cleveland is going through some great real estate times right now! very exciting that your considering NE Ohio @Valerie Couch 

Ok lets get serious, you have $25-30K to spend on a property. You  were from Cleveland (yes I read your profile) so you have an idea what the area is like. You were also a Realtor, is you license still valid (hit me up privately, lets chat about this) so you probably already know some of the suburbs and the average price points.

Now do you have a team in place that will look out for your best interest over theirs while you are in NV? IF NO, then you Buy and Hold. Plus the $25K I'm assuming is just the downpayment, do you have access to additional funds for the cost of the rehab? IF NO, then you buy and hold. 


Looks to me like all roads currently point to Buy and Hold. 

Couldn't have said it better myself!!!  

You might be able to get a 203k loan for the rehab so that you wouldn't need cash on hand for the repairs, but you definitely need systems in place if you want to flip and you're not living locally. Good luck with it.

Tony, 

I am from Cleveland. If you are paying 25k, you are buying ghetto.

There are deals there, but you need GREAT management and long term

tenants.

Be careful on what you buy without "boots on the ground", or you wiil end up selling yoru 25k house for 5k to a local investor. 

Would be happy to give you further advice if you have a specific zip code.

Originally posted by @Daniel Berthiaume :

You might be able to get a 203k loan for the rehab so that you wouldn't need cash on hand for the repairs, but you definitely need systems in place if you want to flip and you're not living locally. Good luck with it.

 Daniel, great point, this really places a twist on the whole transaction, 203k is not going to be a great avenue on the surface level, it is really designated for owner-occupant, now with that out of the way.   Using a FHA203k loan product to acquire a double, triple or a quad and be an owner occupant in one of the units is a no brainer, easy "House hack" - however -  if you are not local and do not intend on occupying one of the units yourself, not going to really work.  A local investor seeking to get a jump start on their investment portfolio, this is certainly a very valuable tool and allows to enter the space with very little money out of pocket, build instant equity, transition into a full time rental in (1yr.) - in meantime you can save money for your next investment as you reap the rewards of a starter investment. 

Full-time investor, the crowd before said it best, if you are not local simple buy and hold acquisition,simple cash flow, well managed is the golden ticket. I truly believe that simple passive investment is a lifestyle. Its about your team, just like anything else, does not matter sports or real estate, you need a team.  

Finally to reinforce the house-flip scenario, be prepared for unforeseen ($$$$)  and adjusting to Point of Sale Violation List requirements on the east side of town and pockets of similar barriers on the west side of the greater Cleveland metropolitan area.  Remote construction is always a challenge, cheap contractor = cheap results (most important lesson, anyone can argue this point, it is not a secret, do not fool yourself). With a flip you can define some controls in advance though. For example: use an investor renovation loan, this is similar to a 203k except designated for investors (if you need access to some lenders, please PM me) - the loan requirements are 20% down against the acquisition & renovation budget, this will mitigate your need to do any escrow arrest for any point of sale violation list, you can prepare a thorough and well documented estimate, vet and properly structure your contractor relationship and set parameters on how it will proceed. You will be able to define a good sophisticated contractor, the contractor will be bound by the terms and agreements as set forth by the bank, each bank withdrawal requires bank inspection progress reports, these loans normally include a 10% contingency account, so you will have a little back-up for unforeseen.  This will allow you to play with  Buy & Flip remotely for a favorable % below 6% normally, again you will need to speak with a lender, I am not a lender. 

With $25-30K you can get one nice buy&hold in an established Cleveland suburb, that will allow you to have a lifestyle of passive income or you can potentially flip a home that will cost you max $150,000.00  --- both options are feasible

Obviously, with whatever it is you are buying always do your due diligence, check city compliance with housing and building, obviously always through escrow/title company, make sure both parties have the proper legal protection and boudoirs in place.

Much Luck!

Originally posted by @Rob Gillespie :

Tony, 

I am from Cleveland. If you are paying 25k, you are buying ghetto.

There are deals there, but you need GREAT management and long term

tenants.

Be careful on what you buy without "boots on the ground", or you wiil end up selling yoru 25k house for 5k to a local investor. 

Would be happy to give you further advice if you have a specific zip code.

Rob, great point, I think he is attempting to leverage his purchase, using 80%LTV -

But, to your point, yes, if you are buying $25K you are buying in the ghetto. Great management and long term tenants, is a very positive way to look at that situation :) I think the best advice is to head your initial statement ---- beware of what you can buy for $25K

Also, great advice "boots on the gourd" - I personally have never bought a single home, that I have not walked into, reviewed hundreds of photos and computed the cost of the rehab an acquisition thoroughly.

Great advice!!!

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