Cleveland OH investing?
Seattle, WA · Member since 2013 · 70 posts · 33 votes
I'd like to hear from anyone investing or invested in the Cleveland rental market. I'm looking into purchasing a duplex or two in the Cleveland area for long term rentals.
I came to Cleveland from Key West, Fl. I met my wife here and didn't even know where to begin in terms of work until I saw a month later after being here that I can buy a duplex for 8k to 30k in a high rental area, in Fl you won't buy anything decent for under 200k, so here I am now and I actually put together a really nice portfolio in less than 2 years being here!
For you guys out there wanting advice for Cleveland props, I learned this market from a very successful woman that got very wealthy here doing this!
Rule number 1. Don't make the mistake of buying ANYTHING on the east side! I almost made the mistake but listened and saw it all go down, they will destroy everything, steal your water tanks, furnaces, fixtures or anything that they can get a dollar for!
I decided to invest in the areas in the west side which is just a tad more money (8k to 35k) and this area includes west park, west side, old brooklyn. I was a contractor in Fl for a long time so I rehab my own with a couple 12.00 hour guys as helpers so my rehab costs are lower than most since I do alot myself. I buy mostly duplexes and im renting 2 bedroom units from 585.00 month to 600.00 per month. 3 bedrooms from 600.00 to 675.00, expect to pay 125.00 average per month in water & sewer since owner pays that in multi-unit props. Now here is what nobody like to hear, Cleveland tenants are somewhat unstable and like to move alot, they also mostly all like to have pit bulls as pets, they will come to look an apt and give you a deposit and then a week later after you took apt off the market, they call you and want deposit back, so you just lost time & money! Also the local help is garbage so repairs can be expensive by qualified people. Also they love to pay late ( they live paycheck to paycheck ) and some are dirty and bring bedbugs in to your house and it costs us money to correct issue.
Well there is good and bad in every business but i'm happy with this here, I actually ended up with 25 of these duplexes and making good money overall! I'm selling a couple of my properties now to buy something in Avon Lake as new personal home, so if any of you guys out there interested in some nice turnkey props, let me know and I can even manage for you if you buy it. For those of you looking for a property manager, I offer this service for only west side investors and my rate is 15% of gross rents, i'm a bit higher than others but my experience speaks for itself, my company does it all from rehabing to placing tenants, we do it all in house so we don't call roto-rooter to snake your drains, we do it at a rate where you making money and so are we.
Good luck guys! Any info needed? I'll be happy to entertain
J-
I'd like to hear from anyone investing or invested in the Cleveland rental market. I'm looking into purchasing a duplex or two in the Cleveland area for long term rentals.
What area are you looking to purchase in?
Hi,
I'm interested in looking into Cleveland and trying to figure out the areas.
Does anyone have feedback on the Hough, Fairfax, and Central neighborhoods?
Thanks in advance!
Hi @Jarett Cory,
Check out The Ultimate Guide to Grading Cleveland Neighborhoods
I think that should answer your question & more. If you're interested in Cleveland, feel free to reach out. I have been personally investing in this market for almost 10 years now and am a licensed agent that can help you get started in the area.
Hi,
I'm interested in looking into Cleveland and trying to figure out the areas.
Does anyone have feedback on the Hough, Fairfax, and Central neighborhoods?
Thanks in advance!
To keep this as vague as possible, I would say do your due diligence on such areas keeping in mind you get what you pay for.
@Jarett Cory As I am not a licensed agent, I can speak more freely. Those are tougher areas.
I do not know if that is your model or not. I just wanted to make you aware.
I figured there's a reason the prices are what they are but hoping to get an idea of neighborhoods that may be on an upswing.
Fairfax, Hough and the surrounding area are filled with distressed homes... however, they are in close proximity to the Cleveland Clinic area. You may be shocked to learn that qualified buyers in some of these areas can get $10,000 to $40,000 toward the purchase, plus up to $8000 in renovation costs. PM me if you are interested in the details.
It will take some creativity to turn this buyers benefit to your advantage, but I am confident there is a way to make it work in the spirit of the intended goals... probably by getting the qualified buyer first, then following up with the project.
Bob
Just throwing in my 2 cents, although a lot will likely be redundant.
As an agent, of course, I'm limited to how I may comment on a neighborhood :-) That said, I always encourage folks to do their due diligence and research crime statistics, demographics, etc. since everything is so accessible online. Generally speaking, if it seems too good to be true, it just may be.
That's not to say that having a rental property in a "lower-income" neighborhood can't be a great opportunity. As @Christian Carsonsaid, a huge concern is vandalism. Not that it can't happen anywhere, but certainly much more likely. It does take some diligence from your property manager.
Here's the positive note, even though finding a qualified renter can be a little more challenging, it can absolutely be done. You often have a much larger pool of applicants to choose from and in many cases they are able to secure cosigners (with good credit and verifiable income). We do extremely thorough vetting so that includes criminal background, employment/income verification, rental history and credit. If everything aside from credit looks good (current landlord gives good review, they have good income, no evictions, no criminal background) and they are unable to secure a qualified cosigner, we will sometimes accept a security deposit equal to three times the monthly rent. This helps to protect the owner through the eviction process should tenant default . However, when a tenant gives that substantial of a deposit, they assume they are going to get it back and are less likely to be problematic.
Good luck and feel free to reach out with any questions or to chat further!
Look forward to seeing you around the BP forums.
All the best,
Val
Im thinking of investing east of cleveland in the Geauga area. Bainbridge, Chagrin Falls, Reminderville, Aurora, Auburn, Russel, Middlefield, Mantua and possibly a little into cuyahoga, beachwood, orange, lyndhurst, pepper pike ect. Has anyone invested in any of these areas that has found they are good or bad areas to invest in?
@Elliot Savin The short answer is that it depends on what you are looking for. There is a wide variety in the cities/townships that you have there. Middlefield and Pepper Pike are about as far apart as you can get (from inventory to median price to incomes to rent levels to distance). Could you make money with rentals in Middlefield, yes, could you do the same in Pepper Pike, unlikely. Could you rehab in the higher end suburbs listed there, yes, but you may have a smaller market on the sell side in Mantua for example, which may make it prohibitive.
IMO, from experience, pick a geographic area and focus on it, based on what your skillset and goals are. If you are actively looking for investments in every town listed above, you will be way too spread out. It increases risk, decreases the accumulation of expertise, and causes you to have different vendors for every area. Not to mention all of the windshield time and the barriers that that presents.
Generalizing, your higher end suburbs there will not generate enough rents to justify the high all in costs incurred. Rehabbing is definitely possible, with a higher all in cash position than you would have in a less expensive area. Lyndhurst, for example, would get you possibilities for both, while still being a densely populated area. Competition is increased as the price point comes down, but risk is reduced from all angles, as long as the area is in demand enough to support what you are doing.
@Elliot Savin, one thing to keep in mind about investing in the Cleveland area, is several cities have Point of Sale inspection requirements on properties being sold, and some have escrow requirements for up to 150% of estimated repairs costs. I don't have an issue with the POS inspections as they provide an additional inspection report for your due diligence, however they mostly cover cosmetic issues and do not provide any good info on mechanicals or structure.
The escrow requirement can be a big deal if you are buying a distressed property as you will need to fund an escrow account with up to 150% of the estimate repairs cost before you are allowed to purchase the property.
Another issue is some cities have much tougher inspection regimes than others, such as Maple Heights. You may want to find something you are interested in then solicit some opinions here on what that city's building department is like to work with.
For POS inspections and Escrow, I have the following list which is a few years old. If anyone has any corrections to it, please let me know and I will update the list:
(Note: I had phone numbers for all these building departments but BP wouldn't let me post the reply if they were included. A little silly don't ya think?)
Bedford
Interior POS: Yes
Exterior POS: Yes
Inspection Fee: Varies from $50 for single-family dwelling plus $25 for each additional rental unit; Commercial buildings are minimum of $75 and maximum of $200
Re-inspection Fee: Same as original Fees
Escrow: An amount not less than $100 and equal to 150% of the estimated cost of repairs for outstanding violations.
Estimate must be provided by a company registered with the City of Bedford.
Bedford Heights
Interior POS: Yes
Exterior POS: Yes
Inspection Fee: $125.
Re-inspection Fee: N/A
Berea
www.bereaohio.gov
Interior POS: No
Exterior POS: Yes
Inspection Fee: $75
Re-inspection Fee: $75.
Escrow: At the request of the owner of the property or his agent, the City may issue a letter or other document signed and dated by a Building Department Official stating that some, but not all, of the violations listed on a specific Certificate of Exterior Inspection have been completed to the City
@Ryan Arth, thank you for your insight. My main focus will be flipping houses. ( Buying, renovating, reselling) For this reason i may have to cast a wide net. I will be offering cash and will be mostly buying trashed homes where people cant afford financially or timewise to put 25k-35k into the house before listing it. I don't have the capital for rentals, so this is my approach so that I have cash flow. I wont be able to offer what the house could sell for if it was listed but sometimes people need cash quickly and I will be there to fill that need. This is why I feel like i need to market to a large area, because these situations wont be prevelant.
@Marc Ramsay, thank you very much for this information.
I knew about inspections but I was unaware of the ESCROW requirements and because i will be flipping. Im gonna have 20k-35k in renovations on pretty much every house i work with so this is very relevant to what i need to know before i move back to OH. Right now im shadowing a company in wichita that flips houses but i will be moving back in a couple months to start on my own and appreciate the help!
PS BP must associate phone numbers with advertising. definetely silly
Inventory is drying up here in northeast Ohio. I'm seeing multiple offers on almost everything I'm writing on, both for myself an clients. You have to be geared up to move quickly once you identify homes. I'd suggest working with an experienced agent, of course.
Likewise, your after rehab value estimates are key. Again, I'd suggest assembling your team with that in mind. Message me if I can help.
@Elliot Savin the situation is prevalent enough, a lot of the folks on BP making a living doing exactly what you are looking to do. What you will find in the market at this moment is that those deals will most likely not be readily available on the MLS. You are going to have better luck capping the ARV of the property at a given number, which will shorten your suburb list. This is because if you are looking at a house that needs 25-35 and to get it at a discount due to seller motivation and inability to bring it up to market standard, you will want that repair number to be a larger percentage of the ARV.
Basically a 600k house on Bolingbrook in Pepper Pike is not going to be much of a deal if it needs 25-35k, which is probably less than a custom kitchen redo would be to fit the neighborhood. It would just sell at a slight discount in today's market, probably not even enough to compensate for it being a bit dated.
Now a 140k house in Lyndhurst would probably be a better fit at that level. You won't be competing with first time homebuyers, they don't have the fix up cash and know nothing about 203k. Mom and pop rehabbers might be competition, but the downpayment plus repairs is more than most Americans have in their retirement accounts unfortunTely,b
Off market properties, direct mail/driving for dollars or being very patient and quick on the trigger if one comes up on the MLS may be your best option when you settle on an area. You are not wasting time by sitting on your hands and waiting for the right one, Warren Buffett has made a career out of waiting for only the best pitches.
It looks like my posting was way too long. Most of it was cut off. I can email a PDF to anyone who wants a copy.
@Ryan Arth Very true Ryan, I only have so much to finance with and really am going to need to be careful in what I buy and make sure that it is worth my time. I also think lyndhurst would be a good place to start, Im looking in the 80k-150k ARV region and that is a pretty good area for that price range
One more thing... aside from point of sale requirements in the communities you mentioned; keep in mind that most of these same communities have Rental Application requirements. The rental applications trigger and inspection. I had a recent case where the inspector cited our property for cracks in the driveway.
Me to Inspector: "no problem, can we wait until spring to fill the cracks"
Inspector to me: "Sure, but you can not rent it out until the cracks are filled"
We were talking 1/8" cracks, that only took a couple of hours of work... but it could not be done with an inch of snow on the ground.
As a licensed property manger, I work with these folks every day. It usually goes well for me, because they know I fix violations properly and permanently the first time. Let me know if you have questions.
The last time I got that line from a City inspector in January I told him to fix the pot holes in front of my property and I'll fix the cracks in my driveway. He started to give me some grief so I said I guess I can defer my property taxes until you do then? Point made. Driveway was fine until spring.
Shadowing Pro Home Buyer?
"Interning" at a flipping company to learn the business
Ok - Pro Home Buyer is the only co who does this on a large scale that I'm aware of here. Was curious if it was them. I understand as well if you'd like to keep it confidential.
While you're here if you're ever up for talking shop over lunch/coffee feel free to reach out. I work from home so am fairly flexible. Always interested in learning about other aspects I have not specialized in.
Hello All,
I am looking into purchasing a duplex in Cleveland on W. 115th st with area code 44111 for about 73K. After reading many posts, I'm not too sure if this is such a great deal anymore. Each unit is paying 650. From the pictures I've seen, the place does not seem too run down. Would love to get everyone's input since I am a investor from California and cannot walk the neighborhood.
I was told that this part of town was a C+ neighborhood. Any thoughts?
@Andy Kim - There is simply not information posted (73K & $1300/M) to give you an opinion. As a remote buyer, my best advice is to find some independent feet on the ground to assess the property and give you unbiased information.
'Worst' case is the property ends up costing you a bit more ( a couple of hundred? ) and everything checks out. Much better to spend a few $ to avoid a bad investment and a lot of problems then to move forward with this much uncertainty.
Good luck.