Rental Property Investor · Los Angeles, CA · Member since 2015 · 73 posts · 55 votes
I live in Los Angeles and have an opportunity to buy a 4bd/1ba home in Cleveland for $13,000. The section-8 tenant brings in $700/month (direct deposit from gov't). The house is in solid condition due to the annual Section-8 inspections.
However, its a bad neighborhood .. alot of boarded up houses on the block (East Cleveland, OH 44112)... with no signs of appreciating.
The selling point to me was that its already cash flowing, no rehab costs, and its pretty cheap.
The concerns: Wholesale via Quit Claim deed, Bad neighborhood.
Would you take this deal?
Also, are there other factors I should consider? This is my first out of state opportunity.. I found a PM that would be $70/month minimum.
Boy I am not sure how to answer this one. There is part of me that sees the ROI and screams at you to take it, but there is a whole other side to the coin here. I can see this property having trouble getting insurance, having trouble renting in the future, having very high damage, you essentially become a slumlord if you keep buying these. But even if you buy all-cash and get your money in 2 years it could be a fantastic deal.
Are the utilities paid by the tenant at least? If not I wouldn't buy it, my experience with Sec 8 was not very good overall and I wouldn't do it again.
Depends on how risk adverse you are. the City of East Cleveland (different entity from the City of Cleveland) went bankrupt decades ago, and unless things have changed since I moved south, shows no signs of ever recovering.
If I would take it, I would save the income to pay for the inevitable repairs you will need to keep it occupied and section 8 qualified. Vacant houses in that area tended to loose their copper plumbing (and aluminum siding, and furnaces) pretty quickly when I was appraising foreclosures in 2009.
The chance to be able to make your money back in less than two years is pretty tempting, you just have to appreciate the risk that puts the pricing that low.
I live in Los Angeles and have an opportunity to buy a 4bd/1ba home in Cleveland for $13,000. The section-8 tenant brings in $700/month (direct deposit from gov't). The house is in solid condition due to the annual Section-8 inspections.
However, its a bad neighborhood .. alot of boarded up houses on the block (East Cleveland, OH 44112)... with no signs of appreciating.
The selling point to me was that its already cash flowing, no rehab costs, and its pretty cheap.
The concerns: Wholesale via Quit Claim deed, Bad neighborhood.
Would you take this deal?
Also, are there other factors I should consider? This is my first out of state opportunity.. I found a PM that would be $70/month minimum.
DO NOT BUY THIS VIA QUIT CLAIM DEED. I repeat DO NOT BUY THIS VIA QUIT CLAIM DEED.
Honestly as someone in California who I assume is pretty new to the industry you probably shouldn't buy it anyway (See the Ultimate Guide to Grading Cleveland Neighborhoods to get a feel for this neighborhood) but definitely DO NOT BUY THIS VIA QUIT CLAIM DEED. Anytime you purchase real estate you need to get title insurance. If I had to guess this property has liens & encumbrances on it that exceed it's value.
As for it being a good investment with clear title, like I said I think you should stay away. If that tenant stays & keeps paying that'd be pretty good but once something like this goes vacant it's going to be broken into & stripped of all value. Getting quality tenants in a neighborhood like this would be pretty difficult. On top of that you will have a hard time hiring a reputable property management company to work houses like this for you. At Holton-Wise we deal with some pretty rough stuff
Assuming you viewed the stuff in the two threads above you need put this in perspective. We deal with that junk day in and day out and we wouldn't even take your money on a house like this. You couldn't pay us enough to deal with it. This is not just Holton-Wise either. This is how most reputable management companies feel about houses that are this low quality.
I firmly believe that houses in these types of neighborhoods only make sense for experienced investors who are local or who run their ground team like a company. As in the people on the ground are your hourly employees not a professional 3rd party company that you have hired. & don't for one second think that having on the ground hourly employees is anywhere near the same experience as hiring a 3rd party property manager. It's not. You will be completely involved in running that business, because that's what it is, it's a business. Hiring, firing, call-off's, sick pay, jobs getting done wrong, supervision, promotions, demotions etc....