Good areas to invest in duplexes in Cleveland area

26 Replies | Cleveland, Ohio

My husband and I would like to buy our first OOS property and want to buy in Cleveland. We would like to buy a duplex in a Class B area so that it is easy to manage remotely with a property management company. What are some good areas? 

We also are looking for referrals for a good agent that invests themselves and a good property management company and lender. 

Any recommendations would be greatly appreciated. 

Originally posted by @Courtney Radmall :

My husband and I would like to buy our first OOS property and want to buy in Cleveland. We would like to buy a duplex in a Class B area so that it is easy to manage remotely with a property management company. What are some good areas? 

We also are looking for referrals for a good agent that invests themselves and a good property management company and lender. 

Any recommendations would be greatly appreciated. 

A,B,C,D,F etc.... They typically mean something different to everyone. So to keep everyone on the same page I created The Ultimate Guide to Grading Cleveland Neighborhoods to give out of state investors like yourself an idea of what's what in our market. I have listed all of the B class areas that the Cleveland market has to offer in that blog. Conversely your definition of B may differ from mine so A & C class neighborhoods are in there as well.

Originally posted by @Aaron N. :

@James Wise - That guide is awesome! Thanks so much for writing it. Would love to hear more about your company, how it operates and the services you provide. 

Glad you enjoyed the guide Aaron. As for more info on my company this forum has strict guidelines on where advertising is and isn't allowed as to eliminate or reduce spam. So I can't go over any of that here but if you hop on over to the Bigger Pockets Marketplace we regularly run our advertisements there. 

@James Wise , thanks for the guide! It has a lot of good information. 

The only other thing I would add when purchasing a propterty in the Cleveland area is be aware of cities that require Point of Sale inspections. Many suburbs around Cleveland require an inspection by the city’s building department before title can transfer. 

Originally posted by @Kristen Murakami :

@James Wise, thanks for the guide! It has a lot of good information. 

The only other thing I would add when purchasing a propterty in the Cleveland area is be aware of cities that require Point of Sale inspections. Many suburbs around Cleveland require an inspection by the city’s building department before title can transfer. 

 Solid point.

Some popular cities with a point of sale (POS) requirement. 

  • Cleveland Heights
  • Euclid
  • S Euclid
  • Newburgh Heights
  • Lakewood
  • Garfield Heights

Some popular cities without a point of sale (POS) requirement.

  • Cleveland
  • Parma
  • Parma Heights
  • Berea
  • Brooklyn
  • Brook Park
Originally posted by @Kristen Murakami :

@James Wise , thanks for the guide! It has a lot of good information. 

The only other thing I would add when purchasing a propterty in the Cleveland area is be aware of cities that require Point of Sale inspections. Many suburbs around Cleveland require an inspection by the city’s building department before title can transfer. 

Thanks for the tip! My understanding is that the POS inspection is usually $250 for a duplex. 

If POS violations are found, does the Seller typically pay to have the work done to correct it, or is this another negotiation? 

Thanks!

Originally posted by @Aaron N. :
Originally posted by @Kristen Murakami:

@James Wise, thanks for the guide! It has a lot of good information. 

The only other thing I would add when purchasing a propterty in the Cleveland area is be aware of cities that require Point of Sale inspections. Many suburbs around Cleveland require an inspection by the city’s building department before title can transfer. 

Thanks for the tip! My understanding is that the POS inspection is usually $250 for a duplex. 

If POS violations are found, does the Seller typically pay to have the work done to correct it, or is this another negotiation? 

Thanks!

 Point of Sale (POS) inspection cost will vary by city.

It's important to note that POS violations are found on pretty much every property. I don't think I have ever seen an inspector come out and inspect a property without siting something. They aren't always major things. We are talking about nickle and dime stuff like cracked sidewalk blocks, peeling paint, messy yard etc....

 Typically we have seller's order the POS before we put the property on the market. Every deal will be different. Some seller's will deliver the property with a clear POS so that they can get the highest possible sales price. Others would rather sell it As-Is with an appropriate discount by having the buyer assume the violations

When I bought a duplex in Lakewood, Ohio, the POS inspection sited the steps to the patio as they were not completely level. They also said the seller had to close the outlets in the unfinished attic. Either way, they were so minor, that the seller just took responsibility to fix them. 

The requirements and prices vary by city. Through working with Cleveland properties I stumbled upon this helpful website that explains the requirements, prices, and contact information. Use this as a lose guide for Point of Sale properties. Always contact the Building Department for updated and more thorough information. 

http://clevelandhousehunt.com/point-of-sale-requirements-for-clevelands-suburbs/

Hi there! I’m a multi family investor in Lakewood (I live in San Francisco but am from Cleveland) and am excited you’re getting started there! One thing I’d say is that you generally have to know the Lakewood market in order to invest there. East of W.117 can get a bit grimy at times while the Detroit area next to Rocky River accounts for some of the highest rents and least vacancy. Investing on the east side of Lakewood vs. the west *could* mean the difference of a good investment and bad.

Calling all of Lakewood a B class city isn’t the most accurate statement. There are parts of Lakewood that are certainly A class and others that are certainly C and maybe even D in parts. My general rule of thumb is to stay west of W. 117 unless you have the systems in place to deal with C or D class tenants.

Happy to make introductions to my broker, agent, etc. I’d use Holton Wise on the prop mgmt front (haven’t worked with them personally but hear good things). Also, I’m happy to advise on any properties you’re looking at. When you’re from the area, a quick glance at the address can determine whether or not it’s a good area.

Let’s connect and chat a bit more! Always love to talk to fellow out of state investors!

Originally posted by @Rich Rodman :

Hi there! I’m a multi family investor in Lakewood (I live in San Francisco but am from Cleveland) and am excited you’re getting started there! One thing I’d say is that you generally have to know the Lakewood market in order to invest there. East of W.117 can get a bit grimy at times while the Detroit area next to Rocky River accounts for some of the highest rents and least vacancy. Investing on the east side of Lakewood vs. the west *could* mean the difference of a good investment and bad.

Calling all of Lakewood a B class city isn’t the most accurate statement. There are parts of Lakewood that are certainly A class and others that are certainly C and maybe even D in parts. My general rule of thumb is to stay west of W. 117 unless you have the systems in place to deal with C or D class tenants.

Happy to make introductions to my broker, agent, etc. I’d use Holton Wise on the prop mgmt front (haven’t worked with them personally but hear good things). Also, I’m happy to advise on any properties you’re looking at. When you’re from the area, a quick glance at the address can determine whether or not it’s a good area.

Let’s connect and chat a bit more! Always love to talk to fellow out of state investors!

Thanks for the shout out Rich.

One thing that I would like to clarify for all. I am in agreement that the further west in Lakewood you go the higher quality the neighborhood is. However Lakewood itself ends at W 117th. So any home anyone is looking at that is East of W 117th is not in Lakewood. That is Cleveland. 

Holton-Wise. James Wise. Lakewood Real Estate Investors & Landlords.

@James Wise Thanks for the clarification - you're absolutely correct. What I meant to say is the closer you get to W.117 the less gentrified Lakewood is. However, parts of Lakewood (Birdtown for example) are becoming "safer" as the days progress. 

@Rich Rodman

Birdtown is definitely trending in the right direction with all the redevelopment that is going on there. Locally, there are some experienced investors I speak with that say Birdtown is the last place in Lakewood that you can find a really good deal. 

Is anybody worried that even though Cleveland is great for cash flow it is not so great for appreciation. Doing some research I’ve notice that sometimes some homes even lose a little value over the years. 

@Courtney Radmall People invest in different markets for different reasons. It is true that Cleveland is unlikely to be a market that you would expect a ton of appreciation in the short term (or even maybe long term), the fact that the COC returns are so high makes it a great market for investing. When you invest for appreciation, it is more like gambling, because there are so many factors. Also, a lot depends on your strategy...if you are planning on using equity to grow, lack of appreciation is a lot bigger of a dealbreaker than if you are buying and holding for pure long term income.

@Courtney Radmall

You bring up a very valid concern, some areas do have some appreciation though.  My personal philosophy is to only rely on the factors which you have a direct impact on - cash flow being the chief one.

For myself, I would never buy a turnkey rental in this market, because the length of time it would take for you to recoup that cost is insane. However, if you can find a property that needs a lot of work, be all in at 70% - 75% of ARV and have great cash flow, then I would be much less concerned.

Here is a scenario I try to run my investments through before making the commitment:

If I had to sell the property shortly after buying it (less than 12 months), would it still make sense as an investment? Let's say you buy something at full retail off the MLS, or even worse a turnkey provider who sells at above market prices, then you would be in the property at 100%+++ of ARV (figure in closing costs, holding costs until tenants are in, minor repairs, etc. you will always be well over 100% of ARV). 6 months into the ownership you have to sell for whatever reason. You will lose 8% - 10% on the listing cost. If you want to sell the property quickly, you will have to offer it at below market, so maybe another 5% - 10% below ARV. Let's say you own the house for 110% of ARV and you will net 80% of ARV after selling it and paying fees, you will have taken a 30% of ARV bath on the house, certainly not an ideal situation.

If, however, you found a similar property that was distressed and own it for 70% of ARV, you would essentially break even or come out of pocket slightly to sell it off quickly. That can translate to a tremendous amount of money. For example, I own a duplex in Shaker Heights that I am all-in for $100k and it appraised for just under $150k last month. If I needed to fire-sale it, I could easily dump it for $130k or so and still make a net profit on it. I don't plan to, and essentially I own the house for free because I was able to pull out 97% of my money back out (I had a couple months of rent collected without a mortgage, so more than enough to cover the extra 3%).

This is a very long-winded way of saying that appreciate, to me, can be an irrelevant factor IF the deal is structured properly.

@P.J. Bremner Thank you so much. That is such great insight. I will definitely be using this for my first deal. I see you aren’t from Cleveland so how did you go about finding your core 4 that you were confident in before pulling the trigger? Since I am assuming you didn’t go with a turnkey company.