Austin, TX · Member since 2016 · 160 posts · 39 votes
We all know Cleveland Population is Declining every year. I hear a lot of reasons, but other than jobs as being the main reason, I cannot seem to find other reasons that make it reasonable for the declinning population.
There are a lot of metros with high unemployment and yet the properties are appreciating greatly (EX: Fresno, CA, Bakersfield, CA).
With such high unemployment rate in Fresno, you would still be able to see an increase in population. Although I strongly believe in the fact that job will significantly impact the population, but after seeing Fresno as an example, I think jobs are not only source nor the true source of population decline. What do you think the reason that may contribute to the decline population?
Interesting population graph that I see here:
Although this is not a great indicator that "population is moving to Columbus", but those curves really made me wonder what is happening.
To local Clevelanders, tell me what you think of the reason of decline population?
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
8y
Gotta love threads like this that scare people away from Cleveland and leave the great deals for the rest of us! Amazon is a lot smarter than I am and they're investing a couple hundred million in the area my properties are so I think I'll stick it out there. If the city dies off in 10 years, at least the properties you buy there will pay for themselves in 5 years haha.
@James Hunt you mean major conferences like the 2016 RNC?
Austin, TX · Member since 2016 · 160 posts · 39 votes
8y
@Federico Gutierrez , I have a trip planned to Cleveland on Jan/Feb 2018 to Cleveland. Until I could drive up to 20 hours on neighborhoods, I am likely not wanting to invest. Yes, you are correct I am looking for reasons why I wouldn't want to invest in Cleveland as I already know all the reasons why I want to invest.
There's a massive amount of deals in Cleveland, and deals aren't the problem. If any investor says they can't find deals, they are probably not actively seeking for it and deeply believed in numbers.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
It's an industrial city in the rust belt and as industry has declined, so have such cities. It also has a pretty high crime rate and poor schools, which makes it hard to attract new residents. The metro area on the whole, however, is doing better. Which is, unfortunately, a fairly common phenomenon in the United States.
Austin, TX · Member since 2016 · 160 posts · 39 votes
8y
@Steven Aviram I would love some new perspective on the picture that I have painted for Cleveland renters, and the reasons that you have listed are generally true for all general renter base. But here is the reason why I don't believe the renter base are really that broad in Cleveland:
Many simply don’t want to deal with the hassles of home ownership. If a hot water tank, furnace, roof, etc. goes bad, the landlord is responsible for it (if they’re a good landlord), not the tenant. <--- This falls under the personal finance problem. All these problems can be fixed by having good finances. I am not very convinced that if they have good finances and cannot take care of this.
Some lost their homes in the housing crisis and didn’t have the credit to buy. <--- housing crisis is 10+ years ago. I know Cleveland had a slow recovery. Even 5 years is enough to recover all credit. I am not very convinced they couldn't fix their credit in 5 years. It is likely that they always had bad credit and bad with finances.
Others have very good paying jobs, but may have to relocate after they finish medical school or residency (lots of med students in Cleveland because of the top-ranked hospitals). <--- This type of tenants are not what I am seeking for. I am looking for long-term tenants.
Others are young people just starting out, who don’t want to commit to buying a house yet. <-- There is no reason for this when rent price is way higher than the mortgage unless they fall under one of the reasons above. (Not knowing the fact that rent is higher than the mortgage also belongs to the category of bad finances).
It is not a bad thing that the tenants that I am going to have is bad with finances as this is sadly the way how investors can make an income. But the fact is that I will not be in local, so in case if frequent evictions I would have to send an attorney to deal with it. =(
@Steven Aviram I would love some new perspective on the picture that I have painted for Cleveland renters, and the reasons that you have listed are generally true for all general renter base. But here is the reason why I don't believe the renter base are really that broad in Cleveland:
Many simply don’t want to deal with the hassles of home ownership. If a hot water tank, furnace, roof, etc. goes bad, the landlord is responsible for it (if they’re a good landlord), not the tenant. <--- This falls under the personal finance problem. All these problems can be fixed by having good finances. I am not very convinced that if they have good finances and cannot take care of this.
Some lost their homes in the housing crisis and didn’t have the credit to buy. <--- housing crisis is 10+ years ago. I know Cleveland had a slow recovery. Even 5 years is enough to recover all credit. I am not very convinced they couldn't fix their credit in 5 years. It is likely that they always had bad credit and bad with finances.
Others have very good paying jobs, but may have to relocate after they finish medical school or residency (lots of med students in Cleveland because of the top-ranked hospitals). <--- This type of tenants are not what I am seeking for. I am looking for long-term tenants.
Others are young people just starting out, who don’t want to commit to buying a house yet. <-- There is no reason for this when rent price is way higher than the mortgage unless they fall under one of the reasons above. (Not knowing the fact that rent is higher than the mortgage also belongs to the category of bad finances).
It is not a bad thing that the tenants that I am going to have is bad with finances as this is sadly the way how investors can make an income. But the fact is that I will not be in local, so in case if frequent evictions I would have to send an attorney to deal with it. =(
I'm sorry but you cannot generalize tenants this much. Yes, some are students. Some are looking for a neighborhood they like before they buy. Some are bad with finances. Some are saving to buy a house. The last one is probably the most common I see. Also, most people who move out (from what I have seen) end up buying a home.
Yes, young people do not spring to purchase a home and they do rent when they are looking. To say there is no reason for this when rent is high is inaccurate. There is the whole commitment issue or risk issue that they do not want to deal with. When looking for a more permanent home, young people would rather have a rental they can just move out at the end of the lease as opposed to trying to sell a home and hope they get what they paid for it.
Rental Property Investor · New York, NY · Member since 2017 · 300 posts · 168 votes
8y
Cleveland is a very favorable market depending on your investment thesis. I would say the stagnant population growth is more of a representation of the whole world. Sam Zell for years has been saying that the world has a lack of demand.
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
8y
1. Housing crisis wasn't over 10 years ago, as a matter of fact, in 2007 there was the strongest housing market ever. The recession started in 2008, hitting bottom in 2010-2011 and until end of 2013 never get really good. 2014 was first year of recovery but still plenty of foreclosures. Still a lot of them now but banks don't let them go for a ridiculously low prices.
2. Health care is our major industry and medical residents are not biggest part of tenants - nurses are. They are young, very well paid, driving good cars and demanding quality housing as they can pay for it. They make really good long term tenants, if you're not talking about $3-4K/mo rent.
3. Rent prices are not much higher when you consider maintenance, capital reserves and cost of buying/selling. Some young people are very educated in finances and can count money: there are plenty of reasons to rent vs buy.
4. People who are bad with finances are not good tenants also but they are better than nothing :)
I'm not defending the Cleveland rental market, there is plenty of business and not declining for sure.
But all these jobs around health care industry create plenty of jobs for low rent apartments, houses and that is another very profitable niche in our market.
Unless you want to scare off investors to get more business, I don't see the reason for a such pessimistic evaluation of Cleveland rental market
Developer · Cleveland / Akron, OH · Member since 2008 · 922 posts · 399 votes
8y
The decline due to the de-industrialization of Cleveland has already been fully realized. The same as the river catching fire, the country at large remembers stereotypes, even if they were twenty years ago.
Half of the city at this point doesn't remember either of these time periods.
The city is evolving and has a more diversified employment base than it once had, but that doesn't make for good soundbytes. We do still have an industrial sector, it is just less than it once was. We now have a much larger medical sector than we once did, but people in Colorado or anywhere else don't think of Cleveland as medical. They think Browns, steel, etc. While this doesn't exactly matter, it may potentially keep young people from moving to the area due to negative stereotypes.
Unfortunately we also have leadership issues here that hold back the potential. A business (and a City) can normally only grow so large from within, at some point it makes sense to bring in people who know how to take things to the next level.
Our mayor was just talking yesterday in a debate about what should be done to combat gentrification...
Combat capital investment by people who are risking their money on a belief in improving areas?
Realtor · FL · Member since 2013 · 372 posts · 83 votes
8y
Great thread everyone. I am following this thread based on my new investment strategy . I am seeking to purchase a 20+ apartment units in the county of cuyahoga. At first i was simply going to buy several MF properties but then I figured with PMs there will be too much moving parts to make that work thus I decided to go after apartment complexes. I would love to hear what people here think about this county and different counties through this state. Im not concerned about appreciation, my focus is monthly positive cash flow. As I was running the numbers, it seems as if these markets will support the 20%+ caps and $17-$25k per unit (in regards to purchase price) that I am seeking. I look forward to hearing from you all. Thank you in advance. .
@Federico Gutierrez , I have a trip planned to Cleveland on Jan/Feb 2018 to Cleveland. Until I could drive up to 20 hours on neighborhoods, I am likely not wanting to invest. Yes, you are correct I am looking for reasons why I wouldn't want to invest in Cleveland as I already know all the reasons why I want to invest.
There's a massive amount of deals in Cleveland, and deals aren't the problem. If any investor says they can't find deals, they are probably not actively seeking for it and deeply believed in numbers.
Don't let anyone pressure you to do deals. I think you are doing fine trying to figure out the markets. Not wanting to invest in Cleveland doesn't mean not wanting to invest. Cleveland is one of slowest growing city in the country. It can't be the only option since you are already a out-of-state investor.
Austin, TX · Member since 2016 · 160 posts · 39 votes
8y
@Irina Belkofer , when I was referring to recovery, I was referring to credit recovery for people, not the city. Totally agree with the fact that people who have bad finances are not good tenants, but hard to agree that they are better than nothing....(especially to the copper diggers =P)
@Tom Ott I strongly believe that I CAN and SHOULD generalize tenants and this is the reason why there is such thing as differences in class of neighborhood. The reason why A class neighborhood is different from D class neighborhood is not because of the construction of the houses, but the people who are in the neighborhood. Cleveland is not New York where people cannot provide commitment due to the mobility of their jobs and thus produce a huge load of "mobile" population. This is actually one of the reasons why I wanted to invest in Cleveland.
@Federico Gutierrez Thanks, I will keep that in mind. Would you mind share with me on the attorney cost per eviction?
Austin, TX · Member since 2016 · 160 posts · 39 votes
8y
@Ryan Arth , I put into some small research time after I read your post.
If it is just stereotype, then that's a great thing as the city continues to change in the right direction the perception will change over time. I am also not a fan that believes that Cleveland is just piles of steel.
Although Cleveland clinic is a now the biggest employer in Cleveland, I can't seem to relate this to low rent apartments. As @Irina Belkofer pointed out previously, these tenants are nurses. My understanding is that nurses are being decently paid, how are they not able to afford houses that are in at least B neighborhood?
Pessimistic evaluations are great for me so I know what risks I am taking. If I happen to scare other investors, that would be a great side effect. =)
@Ryan Arth , I put into some small research time after I read your post.
If it is just stereotype, then that's a great thing as the city continues to change in the right direction the perception will change over time. I am also not a fan that believes that Cleveland is just piles of steel.
Although Cleveland clinic is a now the biggest employer in Cleveland, I can't seem to relate this to low rent apartments. As @Irina Belkofer pointed out previously, these tenants are nurses. My understanding is that nurses are being decently paid, how are they not able to afford houses that are in at least B neighborhood?
Pessimistic evaluations are great for me so I know what risks I am taking. If I happen to scare other investors, that would be a great side effect. =)
Let's get clear on a few things here. 80k+ salaried nurses are very likely NOT renting in low rent apartment, more likely renting in A and B grade areas, or own a semi-decent $150k+ home. The nurse's assistant is the one renting the low rent apartment. These generalizations are simply to paint the picture.
With that said, Cleveland has one of the greatest socioeconomic divides in the country, which has existed for a long time. There are $10k homes in East Cleveland, and $2M+ castles a few miles out in Gates Mills and neighboring suburban cities, and the two don't mix very well. Many that grow up in renter-filled areas fear such things as mortgage payment, credit checks, or simply breaking out of their current environments. Similar to many investors/business owner fearing to take a leap of faith. Getting into $100k in debt is a scary thought for someone who has never saved more than $15k in their life.
There are many deeper psychological reasons as to why a life-long renters don't choose the smaller mortgage payment over the higher monthly rent.
Why don't you just say you want an endless supply of economic slaves to feed your pyramid.
Brad,
While it may sound harsh what Helen has stated is sound business strategy. Real Estate is not hugs & kisses. Its a rough industry that can & will chew you up & spit you out if you do not have thick enough skin to push emotion to the side & make the tough calls based on the bottom line. When it comes to landing in the red or the black the margin for error is small. One or two wrong decisions or bad breaks will put you on the wrong side of that line.
Turnover is a return killer. Plain & simple. The longer a tenant lives in a landlord's property the more profitiable the business will be. Helen wanting to rent to tenants who will result in less frequent turnover has nothing to do with the tenants life choices. She is not actively doing anything to prevent the tenants from buying a home. She is simply stating a clear & obvious fact.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
8y
The majority of people in BP are mom & pop investors or those just getting started. So we can assume that $200 Million Dollar developments are not being built by those participating in this discussion. With that said it's important to note the following.
Nurses start out at $26/hour & up. Nobody buying C-Class assets in the Cleveland area should be expecting to rent to Nurses. Also very unlikely they will be living in B-Class SFR or duplexes. Nurses for the most part are going to be home owners in B or A-Class suburbs or they will be renting in the huge multi million dollar A -Class complexes very close to the Hospital campuses.
Nurses assistants are a tenant base that most of you are going after. That is roughly a $12/hour job. Nothing wrong with these folks just want to make sure investors reading this thread have the most accurate info. Potential investors thinking they will have a $70k college graduate living in their $650/mo duplex that they bought for $75k would be in for a very rough ride.
So @Helen Zhang you going to invest in Cleveland or keep looking for reasons not to?
Cause I deal with many investors that look at numbers but find every excuse under the sun to not buy and then say "I can't find no deals"
Cleveland is awash in rental deals the whole metro area I was there in June I think to spend 5 hours.. I liked what I saw met with my Vendors realtor and PM.. really liked them.. green lighted it.. and just off MLS etc we are buying at least 5 a month and ratcheting up as labor allows we are not capital restrained in that market.. tax's are high and you have that POS stupidity which may or may not be stupid depending on what side of the fence your on on that one.. .. but for a high volume gig with plenty of renters and plenty of inventory Cleveland metro fits the bill for any size wallet.. you can buy hoodies or you can buy A quality and anything in between.. Next time I come back I will spend more than 5 hours.. I had a meeting with the owners of SMartland they have a nice gig going .. We are not doing anything as I tend to fund more of start up type enterprises than mature companies like them. AS one who works in all the big markets currently that are quote un quote cash flow markets.. Except Memphis and ST Louis these markets are pretty interchangeable.. and all this worry about major financial rehab etc.. does not really filter down to the BP I want to own a few rental house's investor.. they are not developers looking to do massive deals in the inner city areas.. or new construction.. they just want to buy a rental house.. Not that complicated Jim and I often talk about that its just a man or women a house and dog.. well not a dog a tenant.. you know what I mean.. to get in to the macro and micro economics of any of these big cities simply does not filter down to the average tenant who is just living their life out.. they are usually born and raised there and are not going anywhere no matter what business moves in or moves out.. UNLESS its a Detroit situation which is unique in America these days.
Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes
8y
Wow this thread has some traction. The title caught my attention. Good discussion and with 3 pages of comments I didn't read them all. The question for most of us investors asking why, is so that we can decide is Cleveland a good place to invest. We ask that question because as I look what RE in Cleveland is producing, the numbers look great mainly because the property values are so cheap!
My assessment is that out of state investors should beware. If your local, you might have the time and understanding the pockets of Cleveland for which you can reasonable expect to do well. But those screaming deals are calling us out out of towners.
Buyer BEWARE, we ask questions as to why the population is declining and the why is important to understand what to predict. Is this a temporary phenomena or not. If it is not a temporary decline then for investors the why is less important compared to the fact that yes it is in a long term decline and buyer should beware.....why?
There is no doubt many reasons for the why....manufacturing going away, union jobs declining, crime rates high, low income jobs abound, etc etc etc. But the facts remain the population is declining! For investors of any type that is BAD!!!! For restaurant owners, hotels, grocery, hair salons, dry cleaners, all retail centers.....and real estate investors BAD! Contrast this with communities that increasing in population and there is opportunity everywhere!!!
Consider this my friends: The population of the United States is roughly 320 MILLION people! Our population growth rate is 1%, which means that 3.2 MILLION more people EACH YEAR IS living in the U.S. that were not there the prior year! Ohio is not getting these people...nada, zilch, nothing (net numbers). That is Bad for business! The why is less important to the fact that it is. The population is growing at a rate of 8 Clevelands a year yet OHIO is not getting any benefit from this!
The Baby Boom Generation is made up of about 75 million people. Every 10 seconds one turns 65, 10,000 a day, 4 million a year for the next 18 years! Those people are retiring, and if they live in Cleveland many are moving out...why because the weather sucks, communities are in decline, there children have left and the housing is old and in many case two story...time to leave! Many states are benefiting from this mass exodus of the Baby Boomers in the north. The southern states ARE GROWING IN POPULATION!
Texas is going bonkers!!! Anywhere along the HWY 35 corridor from San Antonio to Denton (north of Dallas) is booming. Yes any community, ANY Community along that corridor is growing. Texas is getting more than their fair share of the 3.2 million each year....that is good for business!!! Weather is good, especially compared to the North, properties are relatively cheap compared to the nation, job growth is expanding, and the tax infrastructure inviting. But the Why doesn't matter the fact that the population is increasing is like the rising tide, it lifts ALL BOATS. Tide receding lowers all boats!
Unless the population starts increasing you will continue to see a decline in those areas the losses are occurring.....and it will be bad for business......period.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
8y
The majority of people in BP are mom & pop investors or those just getting started. So we can assume that $200 Million Dollar developments are not being built by those participating in this discussion. With that said it's important to note the following.
Nurses start out at $26/hour & up. Nobody buying C-Class assets in the Cleveland area should be expecting to rent to Nurses. Also very unlikely they will be living in B-Class SFR or duplexes. Nurses for the most part are going to be home owners in B or A-Class suburbs or they will be renting in the huge multi million dollar A -Class complexes very close the the Hospital campuses.
Nurses assistants are a tenant base that most of you are going after. That is roughly a $12/hour job. Nothing wrong with these folks just want to make sure investors reading this thread have the most accurate info. Potential investors thinking they will have a $70k college graduate living in their $650/mo duplex that they bought for $75k would be in for a very rough ride.
The majority of people in BP are mom & pop investors or those just getting started. So we can assume that $200 Million Dollar developments are not being built by those participating in this discussion. With that said it's important to note the following.
Nurses start out at $26/hour & up. Nobody buying C-Class assets in the Cleveland area should be expecting to rent to Nurses. Also very unlikely they will be living in B-Class SFR or duplexes. Nurses for the most part are going to be home owners in B or A-Class suburbs or they will be renting in the huge multi million dollar A -Class complexes very close the the Hospital campuses.
Nurses assistants are a tenant base that most of you are going after. That is roughly a $12/hour job. Nothing wrong with these folks just want to make sure investors reading this thread have the most accurate info. Potential investors thinking they will have a $70k college graduate living in their $650/mo duplex that they bought for $75k would be in for a very rough ride.
Very much agree. I think a lot of CA investors get in trouble with distant investments not realizing this. They get in love with the numbers. They look at the property and say hey that duplex looks pretty good and probably better than the place I rented when I started out and was making $50k in my first professional job. Never mind they have no idea if it is in an up and coming or declining area.
if you dont mind me asking, what are the cap rates, prices, and price per door you have been seeing in the eastern ohio area? I have seen some off-market deals (apartments) with 27%+ caps, 15-20k per door. I would be more than honored to hear from you soon.
