Interested in long-distance investing in Ohio

24 Replies

Hi all,

My wife and I are currently looking at long distance investing, buy+hold rental properties outside of our local area. We have one rental in our local area but honestly, the homes are way too pricey vs rent to make it worth it.  We started looking at other towns after listening to the podcast and browsing the forums. 

I found what I think is a "deal" in Cleveland Ohio.  I would like to run it by someone who is familiar with the area to get a better understanding of whether or not it truly is a deal or no.  I'm interested in turn key properties.  

Are there any local/area expert investors, real estate agents or property managers that would like to connect?

Thanks,

Bob

Hey Bob! I'm not familiar with the Cleveland area but I do business around Sidney Ohio if you need any help around this way, I'd be happy to give you my thoughts! What kind of return are you looking for?

Originally posted by @Bob King :

Hi all,

My wife and I are currently looking at long distance investing, buy+hold rental properties outside of our local area. We have one rental in our local area but honestly, the homes are way too pricey vs rent to make it worth it.  We started looking at other towns after listening to the podcast and browsing the forums. 

I found what I think is a "deal" in Cleveland Ohio.  I would like to run it by someone who is familiar with the area to get a better understanding of whether or not it truly is a deal or no.  I'm interested in turn key properties.  

Are there any local/area expert investors, real estate agents or property managers that would like to connect?

Thanks,

Bob

Hey Bob, welcome to the site! I have been investing in Cleveland for years. I am not an agent or property manager, but I know the market extremely well. I'd be happy to advise. 

Originally posted by @Bob King :

Hi all,

My wife and I are currently looking at long distance investing, buy+hold rental properties outside of our local area. We have one rental in our local area but honestly, the homes are way too pricey vs rent to make it worth it.  We started looking at other towns after listening to the podcast and browsing the forums. 

I found what I think is a "deal" in Cleveland Ohio.  I would like to run it by someone who is familiar with the area to get a better understanding of whether or not it truly is a deal or no.  I'm interested in turn key properties.  

Are there any local/area expert investors, real estate agents or property managers that would like to connect?

Thanks,

Bob

 Welcome to the site Bob. Give The Ultimate Guide to Grading Cleveland Neighborhoods a read. This should give you some context to see if this really is an awesome deal or if it's just at a price point that seems great because it's in a high risk heavily blighted area. 

Originally posted by @Cody Bradley :

Hey Bob! I'm not familiar with the Cleveland area but I do business around Sidney Ohio if you need any help around this way, I'd be happy to give you my thoughts! What kind of return are you looking for?

Thanks Cody.  I'm not too familiar with Ohio as a whole.  I'll take a look around the Sidney area and let you know if anything catches my eye.  Return?  Just standard return.  $200/m per door would be nice.

@Bob King remember that in Cleveland the sewer and water always stays in your name. If the tenant doesn’t pay you are responsible for this bill. I found long term this really dents your cash flow. Also be sure to account for snow removal and things of that nature if you’re buying multifamily

Originally posted by @Bob King :

Hi all,

My wife and I are currently looking at long distance investing, buy+hold rental properties outside of our local area. We have one rental in our local area but honestly, the homes are way too pricey vs rent to make it worth it.  We started looking at other towns after listening to the podcast and browsing the forums. 

I found what I think is a "deal" in Cleveland Ohio.  I would like to run it by someone who is familiar with the area to get a better understanding of whether or not it truly is a deal or no.  I'm interested in turn key properties.  

Are there any local/area expert investors, real estate agents or property managers that would like to connect?

Thanks,

Bob

Cleveland is a great area to invest OOS. Many investors stick to the suburbs as the city itself can be risky depending on the street. I always say, if it looks "too good to be true" then it is. 

Originally posted by @Caleb Heimsoth :

 remember that in Cleveland the sewer and water always stays in your name. 

 I had no idea about this.  This is one thing I try to avoid (Based on my limited experience) when looking for investment properties.  Ouch!  Is this an Ohio thing, or city to city requirement?  Someone earlier mentioned Dayton, I wonder if its the same there as well.

Thanks for the information.  I may need to branch out elsewhere. 

@Tom Ott

Thanks Tom.  I'm still learning and as I have no experience what is too good to be true outside of where I am, I am here trying to identify just that.   What I will say is, compared to where I am locally, things are just CHEAP up in Ohio.  I'm loving it.  Or, think I'm loving it.  There's love potential up there.

Welcome to our great community. I lived in Cleveland, Ohio for over 40 years. I know the area well, but it has changed a lot since I left back in 2009. There is a 'west" and "eastside" to the greater Cleveland area. Mr. Wise constructed a map explaining this in great detail. I can tell you as a minority who grew up in Cleveland, Mr. Wise presented objective investor need to know information about the greater Cleveland area.  I would encourage you to review that information and lean on objective information before you invest. I wish you success!

@Bob King Yup, Dayton is great! We've had a lot of properties up around Dayton and just south of it, and they've gone like hotcakes!!

Tenants pay their own utilities here. Definitely makes things much easier that way!

@Bob King Tenants pay water and sewage in Dayton. Cap rates are quite high so it's a cash flow market. If that's what you're looking for I would definitely consider Dayton for a place to invest. If you need some intros PM me. Best of luck

Water and Sewage in the Dayton area is part of the lease negotiation, some tenants pay it and some landlords pay it. The reason the landlord may pay it is to prevent the tenant from running up a large bill and then moving out. I experienced this a year ago. The tenant apparently repeatedly made 'payment arrangements' with the city and made only the absolute minimum to keep the water running. When they moved out the $850 water, sewer and trash bill transferred to me as the owner. I had a choice to pay it or have it applied to my property taxes plus additional penalties and interest. 

I should add, this is permitted by the Ohio Revised Code and most communities take advantage of it to keep from losing money on bad tenants.

Hi All. In the same situation as @Bob King and slowly getting a grip on the Cleveland market and take the opportunity to thank you to all of the investors/real estate agents who kindly share their knowledge on BP. 

I have a quick question re: water/sewage. I understand that in Cleveland the owner pays for it. However I wanted to get clarifications on 2 points. 

1- The bill is under the owner's name however don't landlords pass the bill on to avoid over consumption from uncaring tenants? Can't we state in the rental contract that any unpaid bills will be retained from the deposit. I have had situation (abroad) where the bill stays under the owner for ease of management but i am responsible to pay for it and if I don't it is taken out of the deposit.

2- What is the average monthly bill for a SF?

Thanks a lot for the clarification.

Have a good day!

Hey @Bob King welcome to BP and the Cleveland market!! The cash flow here is the reason you would come as an OOS investor. We are starting to get a lot of national attention now that Cbus and some of the other close by metros have been over-saturated, however, we are still finding deals every day! Let me know if there is anything I can do to assist you on your real estate journey in Cleveland!

Best of luck,

Tal

Originally posted by @Maya De Filippo :

Hi All. In the same situation as @Bob King and slowly getting a grip on the Cleveland market and take the opportunity to thank you to all of the investors/real estate agents who kindly share their knowledge on BP. 

I have a quick question re: water/sewage. I understand that in Cleveland the owner pays for it. However I wanted to get clarifications on 2 points. 

1- The bill is under the owner's name however don't landlords pass the bill on to avoid over consumption from uncaring tenants? Can't we state in the rental contract that any unpaid bills will be retained from the deposit. I have had situation (abroad) where the bill stays under the owner for ease of management but i am responsible to pay for it and if I don't it is taken out of the deposit.

2- What is the average monthly bill for a SF?

Thanks a lot for the clarification.

Have a good day!

That is a great question! In my experience, some investors will do a bill back for water/sewer consumption just as you mentioned based on the number of tenants in the house or unit. For ex. if there are 3 people living in a SFR, it can be written into the lease that the tenants pay the owner $50/month for water/sewer for the first person living there and another $25 for each additional person (or something along those lines).

Hope this helps! If there is anything I can do to assist you on your Cleveland journey please just let me know! Here to help :)

Originally posted by @Maya De Filippo :

Hi All. In the same situation as @Bob King and slowly getting a grip on the Cleveland market and take the opportunity to thank you to all of the investors/real estate agents who kindly share their knowledge on BP. 

I have a quick question re: water/sewage. I understand that in Cleveland the owner pays for it. However I wanted to get clarifications on 2 points. 

1- The bill is under the owner's name however don't landlords pass the bill on to avoid over consumption from uncaring tenants? Can't we state in the rental contract that any unpaid bills will be retained from the deposit. I have had situation (abroad) where the bill stays under the owner for ease of management but i am responsible to pay for it and if I don't it is taken out of the deposit.

2- What is the average monthly bill for a SF?

Thanks a lot for the clarification.

Have a good day!

Hi Maya! You're correct that the bill stays in the owner's name. The owner is ultimately responsible for the bill, and if it goes unpaid it would eventually be tacked onto the tax bill for the property (along with penalties and fees).

Quite a few landlords do pass along the water/sewer charges to tenants. Some will just tell the tenants to open the bill when it comes and pay it directly each month (which I would not advise as it seems like an unprofessional approach), and others will bill the charges back to tenants. Personally I go with the second approach and it works fine. There are some PMs out there who will tell you this is not a good idea (e.g. James Wise), but there are even more who do this successfully and think it's the best way to go. One thing to note is that if you are dealing with A to C grade tenants, it will usually work well... and if you are dealing with lower than C grade tenants they may or may not end up paying the bill (and you could potentially have a hard time collecting from them). The grade of tenant you will attract is a function of the area and the property itself. (For example, if you have a really dumpy "D" grade property in a "B" grade area, you would probably attract mostly "C" grade tenants).

The monthly bill amount range varies tremendously from property to property. I have some where it is as low as 50/mo and another where it is as high as 200/mo. I would say the average is about 80/mo though. It will depend a lot on how many people live in the house and whether they are home a lot vs. always gone at work/school.

In most cities, there are two separate bills... one for water (Cleveland Water) and one for sewer (NEORSD). There are a few suburbs who do things differently though... in Euclid for instance the sewer charges are actually included on the water bill (which is billed through Cleveland Water), in Cleveland Heights they use Cleveland Water, NEORSD, and ALSO a third billing agency specific for Cleveland Heights, in Bedford you just get one bill from the city of Bedford that includes everything. In all cases you can pay online and/or via ACH (automatic draft) so it is relatively painless to keep up on the bills.

Also one more item of note... you did not mention multi family at all, but if you do go that route, most multi family properties do not have separate water meters for each unit, so costs would need to be built into the rent, with no specific back charge possible to tenants.

Feel free to add me as a connection or send me a private message. I have compiled tons of information that many investors find useful (I am an investor myself, and not an agent or PM), and I would be happy to share it.

Cheers,

Rob

I'll chime in on the Ohio water/sewer part of this thread. A lot of comments are close, but don't quite hit the mark on how it works here. The water account can be billed to whomever you choose - tenant or owner. The key is in Ohio, the water bill stays with the property.

These are the things you need to know when buying or renting real property in Ohio as related to water/sewer (and sometimes trash) services:

  • Each municipality is different. Some bill monthly, some bi-monthly, and some quarterly. Many municipalities bill water and sewer charges on the same bill - but not all. Likewise, some also bill for trash collection, which may or may not be billed with water charges, depending on who provides the service. It's enough to make your head spin. There are so many variations with the myriad municipalities in the greater Dayton area that I actually built a spreadsheet to keep track.
  • When you buy a property, if the previous owner doesn't pay the final bill, there isn't a whole lot you can about it. It's not going to go to collections, nor will it show up on their credit report.
  • If a disgruntled tenant skips out on a bill, you can pursue the tenant according to your lease terms, but you will ultimately pay the bill if you want to continue receiving service, whether or not you recover anything from the tenant.
  • When buying buy a vacant property where water service has been shut off, check with the water company for past due bills prior to closing (see #1). This has NOTHING to do with a title search - you must do this yourself. Ensure that the amount due is either a.) credited to you on the the closing statement, or b.) paid by the title company from the seller's proceeds at closing.
  • Whether service has been shut off for non-payment or by request, as long as the water company has record of a meter present at the property, charges continue to accrue. Let's say an owner disconnected service voluntarily and even has proof they paid a final bill, they often won't realize charges are still accruing - especially if the bill isn't going to the correct address (I'll save my rant on the administrative incompetence of utility companies for another thread). Again, see #1.
  • Charges remaining unpaid long enough will be assessed to the property taxes and become due with the 1st half bill for that tax year (billed in arrears the following year - also a topic for another thread). If your purchase contract dictates it, assessments should be reflected in the seller's charges at closing, but title companies often miscalculate tax prorations and assessments - always double check. Or, if you've agreed to take over the taxes as they become due, be sure you know what charges you're assuming. In most counties, you can check for assessments on the auditor/treasurer websites, or call the treasurer's office.
  • Each municipality is different. Some bill monthly, some bi-monthly, and some quarterly. Many municipalities bill water and sewer charges on the same bill - but not all. Likewise, some also bill for trash collection, which may or may not be billed with water charges, depending on who provides the service. Also, a property may receive services from more than one municipality. It's enough to make your head spin. There are so many variations in the greater Dayton area that I actually built a spreadsheet to keep track.

Bottom line is, charges for any service provided by a government municipality is tied to the property, and subject to assessment to the property taxes if they are unpaid.

Here's how we protect against unpaid tenant charges:

With exception for some small multi families, the tenants are responsible for all utility charges. Note I did NOT say they are directly paying all of the actual bills. For water, sewer, and trash services, we still receive and directly pay all of those bills, and assess those charges to the tenant's account. Typically we charge the tenant a fixed amount each month, even when the bill only comes quarterly. When the bill comes, if the charges exceed the tenant's payments for that period, they are billed the difference. Our lease also says that all payments are credited towards any outstanding charges before applied to the current rent. When rent is due, if they fail to include utility charges in their payment, then rent is not paid in full, and are subject to all the bad things resulting from unpaid rent.