Property management in Cleveland
Member since 2020 · 32 posts · 20 votes
Property management in Cleveland
10 Replies
- 3wDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
How much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
A common issue, so Copy & Paste info below:
You’re ALWAYS better off investing locally, where it’s easier to:
· Learn the market
· Network to find deals
· Network to find contractors
· Be more hands-on
· Driveby property to keep tabs on it
· Network to find a decent Property Management Company (PMC)
Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully building a knowledgeable & trustworthy local team.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
· Many of them don't know/care what Class the properties are, so they're incompetent.
· Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood/Market”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
What do you think will happen if you rehab a Class D rental to Class A standards?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
Property Tenant Pool: closely linked to location, but not always.
Property Location: closely linked to tenant pool, but not always.
Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood/Market.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.
Horror Stories from those that did NOT Understand What they were Buying:
Logical Property Management4.9451 Reviews- Member since 2020 · 32 posts · 20 votes3wI appreciate those links and the information.
Quote from @Drew Sygit:
How much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
A common issue, so Copy & Paste info below:
You’re ALWAYS better off investing locally, where it’s easier to:
· Learn the market
· Network to find deals
· Network to find contractors
· Be more hands-on
· Driveby property to keep tabs on it
· Network to find a decent Property Management Company (PMC)
Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully building a knowledgeable & trustworthy local team.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
· Many of them don't know/care what Class the properties are, so they're incompetent.
· Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood/Market”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
What do you think will happen if you rehab a Class D rental to Class A standards?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
Property Tenant Pool: closely linked to location, but not always.
Property Location: closely linked to tenant pool, but not always.
Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood/Market.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.
Horror Stories from those that did NOT Understand What they were Buying:
- 3wArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 910 votes
Quote from @Barshawn Lopez:
I wanted to get some insight from any Property managers in the Cleveland area.
I wanted to get a general idea of the area. What are the economic centers and where are they? How is the public transportation? What are the average rents and what are some if the challenges to anticipate?
Cleveland is very block-by-block, so I’d avoid judging the market by citywide averages alone. The major employment anchors around Downtown, University Circle, healthcare, and the west side help drive rental demand, while transit access can be a real plus depending on the neighborhood. For investors, I’d pay close attention to tenant quality, property taxes, older housing stock, and your PM's quality. Having someone who knows Cleveland street by street is a big advantage, especially when buying from out of state.
- Member since 2020 · 32 posts · 20 votes3w
Quote from @Arman Ahmed:
Quote from @Barshawn Lopez:
I wanted to get some insight from any Property managers in the Cleveland area.
I wanted to get a general idea of the area. What are the economic centers and where are they? How is the public transportation? What are the average rents and what are some if the challenges to anticipate?
Cleveland is very block-by-block, so I’d avoid judging the market by citywide averages alone. The major employment anchors around Downtown, University Circle, healthcare, and the west side help drive rental demand, while transit access can be a real plus depending on the neighborhood. For investors, I’d pay close attention to tenant quality, property taxes, older housing stock, and your PM's quality. Having someone who knows Cleveland street by street is a big advantage, especially when buying from out of state.
Hey Arman, that's good to know. Are rent prices vastly different block by block?
- 3wJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Barshawn Lopez:
I wanted to get some insight from any Property managers in the Cleveland area.
I wanted to get a general idea of the area. What are the economic centers and where are they? How is the public transportation? What are the average rents and what are some if the challenges to anticipate?
Cleveland can vary a lot neighborhood to neighborhood, so I wouldn’t rely too heavily on citywide averages. The big employment anchors I’d pay attention to are Downtown and the University Circle/healthcare corridor, especially with Cleveland Clinic, University Hospitals, and Case Western. Public transportation is better around the main RTA rail and bus corridors, but I’d still look closely at how tenants in your specific area typically get to work. For rentals, I’d pull comps at the neighborhood or even street level because rents can change significantly within a short distance. Biggest things I’d watch for are older housing stock, deferred maintenance, property taxes, and making sure your PM really knows the specific neighborhood you’re buying in. Cleveland can have attractive numbers, but the block and tenant base matter a lot.
Jimmy Lieu, Red 1 Realty4.9120 Reviews- Member since 2020 · 32 posts · 20 votes3w
Quote from @Jimmy Lieu:
Quote from @Barshawn Lopez:
I wanted to get some insight from any Property managers in the Cleveland area.
I wanted to get a general idea of the area. What are the economic centers and where are they? How is the public transportation? What are the average rents and what are some if the challenges to anticipate?
Cleveland can vary a lot neighborhood to neighborhood, so I wouldn’t rely too heavily on citywide averages. The big employment anchors I’d pay attention to are Downtown and the University Circle/healthcare corridor, especially with Cleveland Clinic, University Hospitals, and Case Western. Public transportation is better around the main RTA rail and bus corridors, but I’d still look closely at how tenants in your specific area typically get to work. For rentals, I’d pull comps at the neighborhood or even street level because rents can change significantly within a short distance. Biggest things I’d watch for are older housing stock, deferred maintenance, property taxes, and making sure your PM really knows the specific neighborhood you’re buying in. Cleveland can have attractive numbers, but the block and tenant base matter a lot.
Wow, that is great information. Thanks Jimmy. Sounds like finding a Property manager out there would be a good place to start. Is that right?
- 3wJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Yeah, I think finding a good local property manager would be a great place to start, especially if you’re investing from out of the area. A PM who really knows Cleveland should be able to give you insight on specific neighborhoods, realistic rents, tenant demand, and common issues with the housing stock before you commit to a property. I’m based in Columbus, so I don’t have a Cleveland PM I can personally vouch for, but I’d definitely talk with a few and compare their experience in the specific neighborhoods you’re considering.
Jimmy Lieu, Red 1 Realty4.9120 Reviews
- 3wNathan FisherBusiness MemberProperty Manager · Cleveland, OH · Member since 2020 · 305 posts · 261 votesMake sure you've actually visited the city. Too many OOSI never come to the city and are surprised, by the realities here. Both positive and negative.
Don't invest before you visit.
Aligned Properties Group4.292 Reviews- Member since 2020 · 32 posts · 20 votes3wGreat advice.
Quote from @Nathan Fisher:
Make sure you've actually visited the city. Too many OOSI never come to the city and are surprised, by the realities here. Both positive and negative.
Don't invest before you visit.
I'm planning a visit in the upcoming weeks - Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes3w
Check out The Ultimate Guide to Grading Cleveland Neighborhoods. It should help you learn the lay of the land as you take your trip.
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