East Cleveland Project Funding

17 Replies

Hello! 

Excited that we are getting our feet wet with a multi-family in East Cleveland for BRRR. Looking for a lender for rehab and/or refinance in the area.

Any recommendations for lenders that consider small projects/amounts?

Thanks!

Small (under $50k per property) conventional loans are hard to come by.  I have a portfolio of properties around Cleveland and am also looking for conventional loan pricing for over ten cash-flowing rentals.  I'm flying there later this month to meet with banks as well.  Let's let each other know if there is a bank with the correct appetite for this.  Thanks!

Originally posted by @Egheosa Igbinoba :

Hello! 

Excited that we are getting our feet wet with a multi-family in East Cleveland for BRRR. Looking for a lender for rehab and/or refinance in the area.

Any recommendations for lenders that consider small projects/amounts?

Thanks!

 I don't know that this is something you should be getting excited about. East Cleveland is a BAD neighborhood. I do not recommend anyone out of state attempt to invest over there. Very low probability of you turning a profit.

We will try. The cost of the property and rehab are very low so we hope to be able to turn a profit although it's a rough area.

It is a very dangerous area. I would not recommend. There are much much better options outside of East Cleveland.

@Darren


We are in the same boat invested a bunch of deal all cash trying to get refi done let me know if you find something.

riginally posted by @Darren Eady :

Small (under $50k per property) conventional loans are hard to come by.  I have a portfolio of properties around Cleveland and am also looking for conventional loan pricing for over ten cash-flowing rentals.  I'm flying there later this month to meet with banks as well.  Let's let each other know if there is a bank with the correct appetite for this.  Thanks!

Listen to James Wise.  East Cleveland is a war zone. Slam on the brakes and stop the deal if you still can.

Be careful investing in East Cleveland, personally I wouldn't put my capital anywhere near East Cleveland.

Just to piggyback on the other responses, 

Avoid East Cleveland at all costs! There are many other areas to choose from.

Wow - Talk about a pile on against East Cleveland. 

There is no question that East Cleveland faces it share (and more!) of issues. From the its bleak financial situation, deteriorating infrastructure, to its reduced (read almost non-existent) city services, etc. etc. Having said that, because of its small size (~3 sq mi) and proximity to higher value areas (e.g. University Circle, Little Italy), IF (heavy emphasis) revitalization was focused at the edges, they could / should / would spill over to improve things overall. That's how gentrification happens.

Not to be to rose colored glasses but... there are some glimmers; The retail development (first in ~25 years) that is happening at Superior & Euclid. Also a lot of the multi-family has traded in the past 2/3 years into stronger hands who are upgrading units, raising rents and tightly screening tenants. There are several properties near Superior & Euclid (and over to Taylor) where rents are $600 - $635 for 1B and $735 for 2B; not bad if you are all in @ $15-20K per unit.

In theory, if you fill up enough units with higher paying tenants which implies they have better paying jobs and should have some disposable cash, it will attract more / better retail and so on.

One of the challenges of investing specifically in East Cleveland is as @Egheosa Igbinoba is facing. Because properties have traded at such a low price in the past few years and the city situation, the appraised values even after rehab, higher rents and stabilized occupancy are still low. The P & L may be showing a 20+ CAP but the banks will not lend because the appraisal does not justify. The cash flow may be great, but exit is a challenge.

Having said that, improved stabilized properties are starting to come back to the market at higher per door pricing. IF they get taken out by yield seeking investors (over real 11 CAP), appraisals should improve and a wave of refi may occur. Whether that gets reinvested in upgrading more East Cleveland MF is anybodies guess.

Also, if the proposed merger with Cleveland proper happens, it will probably involve a substantial amount of county / state (and Federal?) funding to infrastructure improvements.

As with any depressed area, cash is king and risk is not low but cash flow can be exceptional.

There's no where in the United states you that you can't turn a profit. East Cleveland is prime for beginners. Cheap houses, and there's pockets of east Cleveland that has nicer houses and streets than the Heights. 

Other places are much better for RE investing other than East Cleveland (bang, bang bang!) especially for beginners, in my opinion. Garfield Heights, Bedford, Maple, and Warrensville Heights are so much better and the amount of money for rehab will require a lot less $$$ because these houses so much smaller compared to the houses in East Cleveland. 

Unless you're planning to buy out whole blocks and gentrify a neighborhood in close proximity to Cleveland Clinic or any of the college campuses, you'll have a hard time raising rents and reselling after rehab. East Cleveland is not ideal for a first BRRR property, especially from out of state. I recommend not testing it yourself, many have had trouble making a profit using your strategy in that area.

Originally posted by @Egheosa Igbinoba :

Hello! 

Excited that we are getting our feet wet with a multi-family in East Cleveland for BRRR. Looking for a lender for rehab and/or refinance in the area.

Any recommendations for lenders that consider small projects/amounts?

Thanks!

Hello,

East Cleveland is is really a "unique" city to invest in. Honestly, best of luck. It is a very different type of investment over there.

I'd also advise against this if you're not a local that knows exactly what you're getting into. It's hard to truly explain EC to someone that's not from here, but rest assured almost all of the city is very very rough.

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