Emerging markets in Cleveland

22 Replies

My husband an I are beginning our opportunity investment careers this year in the Cleveland area. 

After just finishing lindhaul's "Emerging Markets" book we would like to direct our 20k start up money toward areas that are emerging. 

Any feedback/opinions from more experienced investors about markets in Cleveland would be much appreciated. We are aiming for multifamily properties, that are ready for cash flow in an emerging market. 

Does anyone agree that the following are areas are emerging?

Gordon square (btwn w.30th and w.60th) 

Tremont (btwn w.11th and w40th)

Clark/Fulton area 

Ideally we will find C properties 

In C+ or B- areas which are already occupied. Any advice greatly appreciated

Hi Jaime, 

I started investing in Cleveland suburbs in 2014.  I have built up my holdings to 5 apartment complexes and 4 single family currently in NE Ohio and sold all my pricey San Diego RE that doubled in value since first purchase in 2011 and 1031 exchanged for greater cash flow.

I love this stuff!! We are currently repositioning David Lindahl style 3 apartment complexes.  We have two other apartment complexes that we have already stabalized and are currently experiencing excellent cash flow and are yield deals.  We sold two dogs, 8 unit in Shaker Heights and a 10 unit in Cleveland Heights in Dec.  I explained briefly in Podcast 238 how those two dogs went bad really fast.  Currently cash flow is sitting at $160,000 cash flow. If we did not make those two mistakes, we would have been at approximately $200,000 cash flow.  To think, those 10 little single family condos in San Diego were throwing off only $50,000 total cash flow and now we are forcing appreciation on 3 apartment complexes, increasing rents, increasing cash flow, and exponentially increasing the value of these apartment complexes at the same time.

I really like the true Multifamily business model, where, increasing NOI from what one originally purchased is the primary driver of value of property for refinancing and not comps!!!

That is huge!! A few of these apartment complexes we have increased the NOI moving forward, so much thati in year three, four, or five of ownership, we could refi and take back all money we invested or 1031 Exchange for a much larger complex, further deferring taxes.

Now, if I am reading this new tax law just approved, any income we take that we have not offset by depreciation etc... extra, I can deduct an additional 20% off starting in 2018.  

America!!! What a country!!!

Swanny

great to hear good stuff about Northeast Ohio! Thanks for the response. 

I would really like to follow the true multifamily plan and take advantage of the Cleveland market. The first deal is the hardest I've read, I look like I'm 2 months out from pulling the trigger 😰

@Jaime Chandler Cleveland is/has emerged ! My wife and I started investing there in 2015 and have 13 units (one SFH, one Quad, and 4 duplexes). The cashflow is better there than we could do here locally in Central Virginia and the affordability is much better.

Things move fast in "The Land" so have your ducks in a row.  Neighborhoods vary and street to street can change a lot so use you realtor's advice wisely.

@Michael Swan ... probably one of my favorite episodes this year.  Keep it up !

Hi Jaime,

20k should be enough to get you guys started in multifamily in Ohio. You may have to be a bit creative with financing depending on how far into the B-range you are looking at.

Concerning your target areas: Tremont is already BOOMING. Prices are astronomical and finding a decent Multifamily under 150k is rare. I would range Tremont in the B+ to A- area.

Gordon Square I am less familiar with. But can tell you that prices have also been rising in that area as long as you stay North of Lorain Avenue.

Clark/Fulton is more of a risky bet. You can absolutely find properties that are well within your budget with great cash flow. The neighborhood, I believe, is well below B- with little signs of improvement. Though it is situated between Ohio City and the Arts District, so I can imagine it may come alive in the near future.

Let me know if I can be of any assistance!

Ian

All the areas you mention are good.
Have you joined a local REIA group? I belong to Greater Cleveland REIA and it’s been a fantastic resource for me but there are others here as well. Great Lakes REIA I believe is the other one plus there is one in Akron too.
If you want to check it out I can get you in on a guest pass for our next meeting Jan 9th

@Jaime Chandler I think that Tremont has already emerged.  We missed the bus on that one.  Gordon Square is actually located in the Detroit Shoreway neghborhood of Cleveland.  I do most of my investing in Detroit shoreway.  This area is absolutely up and coming.  

I also have done some buying in Clark/fulton.  Its a lower end mixed neighborhood.  You can get GREAT value here though.  In this neighborhood(actually every one) it depends on tenant selection.  I have had a lot of success in both Detroit shoreway and Clark/Fulton.

As people said before though, its street by street though.

Originally posted by @Jaime Chandler :

My husband an I are beginning our opportunity investment careers this year in the Cleveland area. 

After just finishing lindhaul's "Emerging Markets" book we would like to direct our 20k start up money toward areas that are emerging. 

Any feedback/opinions from more experienced investors about markets in Cleveland would be much appreciated. We are aiming for multifamily properties, that are ready for cash flow in an emerging market. 

Does anyone agree that the following are areas are emerging?

Gordon square (btwn w.30th and w.60th) 

Tremont (btwn w.11th and w40th)

Clark/Fulton area 

Ideally we will find C properties 

In C+ or B- areas which are already occupied. Any advice greatly appreciated

Hi Jaime,

Unfortunately it is going to be extremely difficult to get started in Tremont or Gordon Square (the true Gordon Square area, not the outskirts) with only 20k.  I would say these areas are no longer "emerging" but more so booming and possibly even over inflated currently.  You would be really hard pressed to find a good deal in either of these areas that isn't going to require significant work.

There are some okay parts of the Clark/Fulton area, but I'm not sure I would consider it to be emerging and I wouldn't feel comfortable recommending someone to invest there for the most part.

Hi @Moises B. ,

That's if she purchases a 5 unit or more.  4 units or less are residential and not commercial.  That is 2 entirely different beasts.

Swanny

I am from Cleveland and have bought a few homes  but looking to make some more  investment purchase any reccommandation . Flip or property that already have good rentals. 

I have already had to evicted my first tenant time consuming when you don't live there.

I need some references for individuals/Contractors in the Cleveland area . 

I need a good real agent in Cleveland. 

Cleveland is rocking, the hype is real, the areas are growing, the values are moving. The referenced areas in your post are popular, I know some of the referenced areas now have expanded or are expanding the zone of the defined neighborhood, I think you will see a few opportunities begin to spring up and again much change is coming for the better.

@Jaime Chandler   Welcome to BP and Cleveland!  Tremont is already past emerging.  Gordon square is already Hot with a lot of competition, but you can still find opportunities.  Clark Fulton has more risk and is less desirable, it may turn around in the long-term future. 

Let me know if I can help in any way.

Hi Ernesto,

If you listened to Podcast 238, I explained that I am extremely amped and don't like to leave much to chance.  I have high expectations for my PM, lender, Commercial Brokers, RE CPA, and RE Attorney.  I have put all of my eggs in one basket and am guarding it with my life.  It is a bit of a roller coaster ride at time, but I love the ride!!! I have invested In suburbs of Cleveland and Akron now, since 2014.  I have been out their about 15 times, since 2014.

Reach out to me anytime. I love this stuff!!

Swanny

Originally posted by @Jaime Chandler :

My husband an I are beginning our opportunity investment careers this year in the Cleveland area. 

After just finishing lindhaul's "Emerging Markets" book we would like to direct our 20k start up money toward areas that are emerging. 

Any feedback/opinions from more experienced investors about markets in Cleveland would be much appreciated. We are aiming for multifamily properties, that are ready for cash flow in an emerging market. 

Does anyone agree that the following are areas are emerging?

Gordon square (btwn w.30th and w.60th) 

Tremont (btwn w.11th and w40th)

Clark/Fulton area 

Ideally we will find C properties 

In C+ or B- areas which are already occupied. Any advice greatly appreciated

 If you havn't already read it check out The Ultimate Guide to Grading Cleveland Neighborhoods. Myself personally, I see the biggest opportunity in Euclid right now. Prices are still very cheap. The POS helps beat them down. I see a big uptick in rental pricing & demand after Amazon comes to town.

Gordon Square & Tremont are great neighborhoods but they are well past what I would call emerging. People are buying houses for well over $300k in those neighborhoods. Clark/Fulton is typical C-/D neighborhood. Don't see that changing anytime soon. All the poor who were displaced from Gordon Square & Tremont need to live somewhere. Clark/Fulton is a very logical place for that.

@Michael Swan - just stumbling upon this thread now as i was exploring detroit shoreway as another area to invest and saw your comments and recall listening to your episode on BP sometime last year :) Congrats on all of your successes, been at it in the CLE market now for the past year and looking to ramp up into apt complexes although i know they get scooped  up pretty quickly out there. curious at the time of your 1st comment, were you at $160k cash flow monthly already? Incredible and inspiring stuff man.