This article gave me second thoughts on Investing in Cleveland OH
Most Popular Reply
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8yI know nothing of Cleveland Ohio but I know this.
If you look at Macro trends nationally most of the growth is coming to the warm belt states.
So when making investment decisions it comes down to can you get something similar in a more high growth area for the long term in another state that is not declining or flat lining for economic metrics?
Example in GA we are slated to grow by about 5 to 6 million over the next 12 to 15 years. You could basically drop the whole state of SC on GA and that is how fast we are growing. I think Texas is one of the few states outpacing us right now. Florida is also growing well. Migration patterns people tend to want to live in warm climates and cost of living is pretty low as well.
I can see local investors in Ohio investing heavily where they live. I am talking if you are a national investor looking at markets equity growth tends to outpace cash flow long term so appreciating markets tend to make more sense than cash flow only markets.
I do not invest in residential but know a ton of friends who do.
There are bad spots in every state for sure to invest in.
So if the choice was for instance a high growth state like GA and property was 100k for 800 rent or Ohio for 100k for 1,000 rent the difference is not large enough. One market you are getting about 200 more a month rent but long term the rent growth tends to be higher in appreciating markets and the equity growth upside is more whereas the other more flat lining market is cash flow only.
It's just like for me if I can own a commercial strip center for 11% return or a restaurant for 15% I will not do the restaurant because of the time and work involved. Now if restaurant return is 25% we are talking a different ballgame. There is a headache and active versus more passive component to evaluate a return.
Plopping 40k down for a few hundred a month cash flow doesn't do anything for me.
Talked to a South African investor the other day when he was visiting the states in GA. He loved SFR because in other countries you usually cannot load up on 10 financed loans like you can here so it is all perspective. What one person does not like at all another loves.
If I was analyzing cold belt states and did not live there the return metric would not have to be just a little higher but very high to invest there versus warm belt states with better projections for long term growth.
Again not bashing Ohio investors should just analyze each state for opportunities for risk/reward.
21 Replies
- Investor · Canton, OH · Member since 2017 · 13 posts · 10 votes8yYou should go into Cleveland with your eyes opened. Understand that the Midwest it's not like Florida or Las Vegas Real Estate. I own many properties in and around Canton Ohio. Out of town investors are amazed at how cheap these properties are, but they are also amazed at turnover costs vacancy and how anti-Landlord the cities are becoming. I love the area, but do my best to avoid buying in big cities like Cleveland, Akron and Columbus.
- Real Estate Agent · Cleveland, OH · Member since 2016 · 61 posts · 24 votes8y
It depends on what neighborhoods you're in.. We have 20 rentals the majority in Tremont and Detroit Shoreway areas. We are having no challenges with rents or renters. Also bare in mind that 98% of your success lies in proper tenant vetting....
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes8y
Originally posted by @Wei Mai:
Hello BP,
I have been looking into investing in Cleveland Ohio for a few months now and have been researching neighborhoods to begin in. Today, I came across this article about the most distressed cities in america and basically ranked Cleveland #1 on the most distressed cities. Should I be deterred from investing in this market? Would like to hear all your thoughts.
Article here America's Most and Least Distressed Cities
As much as I like CityLab, I think I would have to disagree with this. Yes, Cleveland needs some love, but it has come a LONG way since the 1990s when everyone was leaving the downtown and building in the suburbs. They CANNOT build/renovate buildings fast enough downtown anymore. You see that spill over to the East and Westsides of the area.
The Cleveland Clinic has grown into the largest employer in the state of Ohio and the second top-rated health care system in the United States just after the Mayo Clinic!
According to that article/map, the only places worth investing in are markets that have been tapped out for years! You never want to be last to the party and miss out on all the fun. You want to come early and experience it all! (if that makes sense!)
Come check it out for yourself. You can come see the Rock n' Roll Hall of Fame! Or watch a play at Playhouse Square (the largest theater district in the United States outside of Broadway)
Good luck!
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes8y
Originally posted by @Wei Mai:
Hello BP,
I have been looking into investing in Cleveland Ohio for a few months now and have been researching neighborhoods to begin in. Today, I came across this article about the most distressed cities in america and basically ranked Cleveland #1 on the most distressed cities. Should I be deterred from investing in this market? Would like to hear all your thoughts.
Article here America's Most and Least Distressed Cities
An important thing to note is that the article mentioned the city of Cleveland's population (390,580) not that of the greater Cleveland area. I would agree that roughly 90% of the city of Cleveland itself is somewhat distressed. If you take a look at the BP favorite that I wrote called The Ultimate Guide to Grading Cleveland Neighborhoods you will see that almost the entire city of Cleveland is C-class or lower. But if you look the suburban areas are almost entirely B-class or higher.
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes8y
Ask yourself why Cleveland. If it's because of cash flow, then there are a lot of properties that can cash flow in B and C neighborhoods in Cleveland and the suburbs. If it is because of job growth and population growth, then do some more research. What I see in Cleveland is flat population growth, meaning flat RE prices. This is not necessarily a bad thing if you're looking for cash flow. Just make sure you buy right and are in a location that will remain stable at worst.
- Real Estate Broker · Cleveland, OH · Member since 2015 · 255 posts · 248 votes8y
@Wei Mai All good points here, I would highly recommend making a trip to Cleveland or any area you're looking to invest in, and speaking with local investors about their experiences, neighborhoods of interest, etc. Cleveland (and suburbs) are very diverse, and there's lots of good and bad pockets.
Best advice for anyone out of state would be to put in the time doing the research. Not just the neighborhoods, but also your PM, boots on the ground, whatever you want to call it. I have clients making awesome returns in the roughest parts of Cleveland, and others are in the negatives in B+ areas.
- Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes8y
Depending where you get your sources, even here there are some reports saying Cleveland #1 market to invest then you will find other's in the opposite direction.
Real Estate is an investment which brings risk. It's a matter of how comfortable you are with the risk in this market. Some submarkets in Cleveland are less risky compared to others, but you pay for that in purchase price. Always need to think you do get what you pay for in Real Estate. So if you're in a submarket that is $60000 it's not going to have the same risk as $120000.
Reach out to other out of state investors and gain their thoughts and opinions if they currently invest in Cleveland.
- Investor · San Jose, CA · Member since 2017 · 343 posts · 102 votes8y
@Wei Mai- Search BP hard, you will find enough details on OOS and REI in general, network with fellow investors and get the first hand knowledge. Connect with @Michael Swan as he had success in some areas. You have to read and listen to his podcast where he mentions about loosing $200K. It's long term play still figuring out the secret sauce, some of the reasons of failures are upfront and clear but still investors are tempted on dreams and seem to be very happy.
Good Luck
Vivek
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes8y
I know nothing of Cleveland Ohio but I know this.
If you look at Macro trends nationally most of the growth is coming to the warm belt states.
So when making investment decisions it comes down to can you get something similar in a more high growth area for the long term in another state that is not declining or flat lining for economic metrics?
Example in GA we are slated to grow by about 5 to 6 million over the next 12 to 15 years. You could basically drop the whole state of SC on GA and that is how fast we are growing. I think Texas is one of the few states outpacing us right now. Florida is also growing well. Migration patterns people tend to want to live in warm climates and cost of living is pretty low as well.
I can see local investors in Ohio investing heavily where they live. I am talking if you are a national investor looking at markets equity growth tends to outpace cash flow long term so appreciating markets tend to make more sense than cash flow only markets.
I do not invest in residential but know a ton of friends who do.
There are bad spots in every state for sure to invest in.
So if the choice was for instance a high growth state like GA and property was 100k for 800 rent or Ohio for 100k for 1,000 rent the difference is not large enough. One market you are getting about 200 more a month rent but long term the rent growth tends to be higher in appreciating markets and the equity growth upside is more whereas the other more flat lining market is cash flow only.
It's just like for me if I can own a commercial strip center for 11% return or a restaurant for 15% I will not do the restaurant because of the time and work involved. Now if restaurant return is 25% we are talking a different ballgame. There is a headache and active versus more passive component to evaluate a return.
Plopping 40k down for a few hundred a month cash flow doesn't do anything for me.
Talked to a South African investor the other day when he was visiting the states in GA. He loved SFR because in other countries you usually cannot load up on 10 financed loans like you can here so it is all perspective. What one person does not like at all another loves.
If I was analyzing cold belt states and did not live there the return metric would not have to be just a little higher but very high to invest there versus warm belt states with better projections for long term growth.
Again not bashing Ohio investors should just analyze each state for opportunities for risk/reward.
- Real Estate Investor · Austin, TX · Member since 2015 · 214 posts · 234 votes8y
I, too, am interested in Cleveland but have seen some mixed data.
Neighborhood Scout is a data source that provides a lot of different data points to consider, as well as some proprietary indicators. One of them was "security". It rated the Cleveland suburb I was considering as "least secure" based on the past track record. Catering property values in the 2000's followed by tons of foreclosures, and only recently have the prices appeared to somewhat stabilize. On the other hand, it rated high for potential appreciation. So, this particular area was "high risk" and "high potential return". In fact, if you look at a chart of prices, it almost looks like it's forming a rounded bottom (anyone who has ever read a little about technical analysis in the stock market knows what I'm talking about). As a natural contrarian, I find that intriguing.
If I had a lot of money to spread around, maybe I'd build a portfolio of homes in the sunbelt, where there is growth, mixed with some cash-flowing properties in the midwest. Some will inevitably do better than others at any given time.
There is a really fun and interesting book called the "Cleveland Neighborhood Guidebook" that can add some anecdotes to the data. I agree with others on seeing a place first-hand before investing.
- Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes8yWhen I look at the list of least distressed it seems to be a lot of places that won't cash flow and are very expensive . Interesting to see Philadelphia on the distressed list I know there are several neighborhoods there that have appreciated and gentrified significantly. Many have made good money investing in "distressed assets" . During the recession and housing crash almost everywhere was "distressed " Of course there are risks and everything is local . It's particular neighborhoods that can become hot in these "distressed" cities that can help to push the prices up .
- Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes8y
I believe any market can be good or any market can be challenging.
It is really about who you have there as a connection for boots on the ground
when you are investing out of your home town.
I see many investors come to the Cleveland market by buying off of Craigslist or the MLS and
are soon in over their heads because they just do not have the support team.
I truly believe that is why most of my investors stick with me. I take their calls after the deal has closed.If you do not have that, I would seriously take a second look at any market, unless you are buying a Wall greens or other National tenant occupied property.
Just my 2 cents.
- Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes8y
Markets change all the time, but you can make money in almost any market if you know what you're doing. And you never know what the future has in store.
Did you know that Cleveland was once the 5th largest and one of the richest cities in America? Millionaires row, where the Rockefeller's lived, was one of the richest streets in the world back in the day. Crazy right?
A bunch of cities in western WA have been very undesirable and have some of the worst crime stats around, but they are also the fastest rising home values/rents in the country right now.
I buy in Cleveland because it cash flows like crazy, it's not overinflated, and it has tons of upside potential. I also buy stocks when the prices are low and sell them when they go up, not the other way around. But that's what most "investors" do and it's also why most of them lose money, I suppose :)
If you've been looking into Cleveland for a couple months not then it's probably time to buy a plane ticket already!
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes8y
Going by those percentages, how did Cleveland even arrive at the top of that list?
1 Cleveland, OH 390,580 90.3% 2 Newark, NJ 279,790 81.0% 3 Buffalo, NY 259,520 70.0% 4 Detroit, MI 690,070 98.9% 5 Toledo, OH 282,280 51.8% 6 Memphis, TN 657,170 66.1% 7 Milwaukee, WI 599,500 46.6% 8 Stockton, CA 299,720 69.8% 9 Philadelphia, PA 1,555,070 49.3% 10 Tucson, AZ 528,370 58.6% - Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes8y
More deals for me! haha
Like James said, those numbers are dramatically thrown off because the city-proper is skewed compared to the metro. Same for most large midwest metros.
Additionally, I'd add that after Trump signed the pipeline bills into action every steel mill in Cleveland is firing. Hard to argue with those economics.
- Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes8y
@Wei Mai Cleveland is the Best overall rental market in America, 2 years in a row ranked by Forbes, Really the last 10 years, but they were not paying attention. With Amazon taking the old Euclid mall, about 800k sq ft, and now building a 1 million sq ft facility 20 min away in the heart of everything , seem as though pricing is going even higher. I am not aware of any other city in america that has gone through a more positive change than Cleveland. All the best
- Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes8y
Anyone who doesn't invest in Cleveland leaves more for us that do :-)
When it comes to strictly cashflow, low point of entry and nothing else, I challenge anyone to show me where else in the country you can get 2 percent to 3 percent rule on properties in C and sometimes B neighborhoods on a routine basis. I own 6 units in Cleveland (2 duplexes and 2 SFR's) and all meet this criteria. Yes, you may have to do a little more sweat equity from how you do your offers and the surprises that turn up during the home inspection (That's what an inspection contingency and an appraisal contingency are for).......but that's the criteria I've set and it's worked out pretty well so far.
Again, I am all ears if anyone can show me better returns in C or B class areas than Cleveland.
- Member since 2019 · 4 posts · 3 votes7y
If we are moving to Cleveland, would buying a MF unit in an area like Shaker Heights using an FHA loan be a good idea? Thinking of buying something around 80-120k and doing a small renovation (like updating kitchens and baths plus new windows if needed) and house hacking for a year to get our feet wet
- Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes7y
Possibly some better neighborhoods outside of D,F.... Some Californians are competing with others with cash driving up other bidding prices. If not pleased you can come here look. You need a lot of cash and homes do not cash. You bet on steep potential appreciation until economy ran out of steam.
- Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes5y
@Wei Mai Clearly this is a 3 year old post, but still just was brought to my attention recently.
I feel cleveland is undervalued on the purchase of properties, however it offers great rents.
This is quickly changing. Cleveland is on the rise! I still highly recommend investing Cleveland.
It has been my market for 23 years and have no plans on switching markets.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.