BRRRR 2-4 unit comps?

Question

Hi, looking to possibly get started in Cleveland and hoping to find a 2-4 unit to rehab and MTR so need to be relatively close to Cleveland Clinic, etc.

We’re OOS and just started looking so haven’t reached out to any pro’s on the ground there, but when I look on Zillow, realtor, etc I’m seeing a lot of distressed properties that look like they have potential… However, what I’m not seeing are many comps for ARV. i’m seeing a couple around $150,000, but they’re all dated and not even all that nice.  is it just that there aren’t very many nice up to date duplexes there? Or maybe they’re all just further out away from the hospital area?

Michael Smythe · Answer

BE CAREFUL!

Midwest property/tenant Classes are NOT like those in California.

We've seen too many investors have unrealistic expectations and get burned.

In our OPINION (always verify your area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenants: Majority will have FICO scores of 680+.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenants: Majority will have FICO scores of 620+, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should often be used to also cover nonpayment & evictions.
Tenants: majority will have FICO scores of 560-600, many blemishes, but should have no evictions in last 2 years. Verifying previous 2-years of rental history very important!

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenants: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Simon Ashbaugh · Answer

Fairfax (the area directly below the CC main campus) doesn't have a ton of comps yet, since its still up and coming. Often if im selling or buying over there ill check for off market comps as well!

Shane Kelly · Answer

Hey! It's gonna be a mix of factors. Most of the small multis that are close to the clinic are either not in the neighborhoods that you'd want them to be (as a lot of neighborhoods relatively close to the clinic are still not great) and/or the ones that are in the neighborhoods you'd want them to be are priced rediculously (i.e. Little Italy, Cleveland Heights, University Circle, and most of Fairfax). Some areas like Hough, some of Fairfax, very particular parts of Woodhill Homes, and whatever you can find just North of Case Western University do have some inventory but you won't find many selling in pristine conditions. Most are total rehabs or at best have a lot of deferred maintenance. So yeah, for ARVs in some of these areas there's still a lot of trailblazing to be done, as most of them haven't been nice enough neighborhoods for long enough to truly know what the top end looks like.

Evan Hopple · Answer

@Travis Andres Not finding ARV comps now could mean that there simply might not be anyone investing in that area. I can see headaches for you in the refinance phase if you decide to move forward in some of the areas that aren't being invested into

Steven Goldman · Answer

If you are planning on working in the Cleveland area you should find a team of professionals who can assist you. Agent, property manager, contractor, lender. We have found that the borrowers whop are successful put together that team and then let them run with it and present them opportunities. The real estate websites are O.K. for educating yourself but are not the place to find properties. You would be netter off looking at real estate groups on Facebook. Good luck and keep moving forward.

Tanner Lewis · Answer

Normally Zillow and Redfin do not have many multifamily properties listed. I suggest talking to a realtor in the area to find some comps or using third-party software to pull comps from the MLS. Either way, I would try to get access to the MLS in some capacity since they typically show more than listed on websites like Zillow.

John Chong · Answer

If you start working with a local agent they should be able to guide you in the right direction and run comps for you.

Zach Edelman · Answer

You should still be able to connect with a local agent that should be able to assist with this.

Bonnie Low · Answer

We've been looking in Cleveland for a couple of years. If you're finding a duplex for $150k on the MLS it's going to be in a rough neighborhood and not a good target for midterm renters. You might find a duplex Sub To or with seller financing for that but, again, if it was in a better neighborhood the comps would probably be telling the seller to ask more. So I'd be extremely cautious and work with an agent who really knows the areas as they can change a lot from neighborhood to neighborhood. Don't get me wrong, I like Cleveland, but you definitely need to buy in the right area.

BRRRR 2-4 unit comps?

Most Popular Reply