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
@Andy Kim - Based on the Zip code it looks like you're talking about the section of W. 115th on either side of the I90 out towards Lakewood. I agree it's a C to C+ neighborhood and if the duplex is in really good shape, then it may be worth that price at a retail level. Also, make sure the property is in the City of Cleveland and not Lakewood so you don't have to deal with a point of sale inspection.
With the age of the homes in this area, as @Oren K. as he knows this area really well.
A little expensive for that area. You would likely have a hard time getting out of it without taking a loss. Hard to say for sure without reviewing it in more detail, but there are likely better values out there.
I agree, maybe a solid C. Honestly, I have to disagree with Marc, I would prefer that it was Lakewood over Cleveland proper. At least when the police are called you will get a timely response. I would rather deal with their city services, as I never had a complaint with Lakewood in the nine years that I dealt with them. I also think you could attract a slightly better clientele just because of the name.
I sold a Lakewood property with the POS inspection in the fall and had zero issues. To be honest, the inspector pointed out code violations and said that there would be a follow up inspection after completion. There was no follow up, no response to my contacts, and the property closed out just fine.
@Ryan Arth has some good points. Lakewood was relatively easy to deal with compared to some other cities in the Cleveland area, and being in 'Lakewood' does make it easier to rent. Definitely better police response as well. The police response at one of my Cleveland buildings is terrible.
I'm certainly not experienced like the others here, I'm just getting into the game, but I intend on entering the Cleveland market soon and as such have been doing tons of research. From what I've learned, that area is a C neighborhood as others have mentioned. Others' experience with the city of Lakewood is valuable and worth noting (I certainly have).
In terms of the price though it seems maybe a little high for investing purposes, of course without the rest of the numbers I couldn't say for sure. Once you figure in tax, insurance, owner paid utilities and then account for maintenance and vacancy rate, seems like the return might be borderline... It all depends on the actual costs you're looking at.
Since I'm still learning, I'll certainly check back to see what you decide at the end of the day...
I'm just beginning to learn about RE investing, but I lived in Lakewood for ten years before moving to Bratenahl (Cleveland). One thing to note is that the property taxes in Lakewood are significantly higher than Cleveland (which is one reason why we moved). Be sure to take that into account when making your analysis.
Here's my analysis on this property. Would like to know what you guys think.
Purchase Price: $72K
Down Payment: 25% = $18,000
Closing Cost = $3,000
Estimated Repairs = $1,500
Interest Rate: 4.625%
Total Cash needed: $22,500
Income:
Rent: $1,300
Monthly Expenses:
Water Utility: $100
Insurance: $100
Property Tax: $190
Lawn Care: $35
Vacancy (5%) = $65
Repairs & Maintenance (5%) = $65
Cap Ex (5%) = $65
PM (10%) = $130
This gives me a COC of 14.5%. I am from California so these numbers look really good for me. But I would like to compare these numbers to those who are familiar with that area. Any input would be great before I tell my realtor to submit the offer. Thanks everyone!
@Federico Gutierrez has an excellent point on the valuation. I was talking about the area from a macro sense, but the profitability due to valuation and taxes is what will dictate whether this property meets your criteria or not.
@Oren K. - I am hoping that the taxes can be re-evaluated at some point so I wouldn't be paying so much. But to answer your question, yes that is the current tax.
One more thing to note is that the roof is on its last leg, give or take 2-5 years.
This is another question I wanted to address. From what everyone says, YOU MAKE YOUR MONEY GOING IN. This is my first time expanding my portfolio into Cleveland and was shocked when I read in an addendum: "property must appraise for the purchase price".
it's a common practice anytime you get a loan. Lenders will only lend to purchase price amount or appraisal amount or its up to you to pay the difference
I thought your CAPEX was too small to begin with. If your roof is that far gone, you certainly need to budget well above 'normal' CAPEX.
Regarding the taxes; run your numbers with the valuation at the purchase price as the county WILL increase your taxes in short order. If you are paying less then the current valuation, they will not 'automatically' reduce your taxes and you will have to appeal them (read this to mean abnormal legal fees or contingency based).
Andy - You can start with a % but before committing, someone (I know you are remote) needs to go through the property and assess the remaining life and replacement costs of all the key systems which typically are CAPEX (e.g. Roof, HW Heater, Furnace, Appliances, Paving, etc. etc.). IF I recall, this this a duplex and you mentioned that the roof is near its useful life so lets say 3-4K within 3 years, also one other major component like the HW tank, so another 1.5K. So you need to set aside 5.5K over 3 years, or $1,800 per year ($150 per month). This is more then double the 5% you are budgeting.
As I mentioned previously, there is nothing like boots on the ground to investigate and truly assess a property.
With the actual information, you can now correctly budget how much you will need over the next 5 - 10 years. That becomes you CAPEX budget.
To be frank you can't quantify exactly how much better you will do as tenants rent properties, not spreadsheets and tenants do not read your spreadsheets.
However, Lakewood is nicer than Cleveland. Over the long haul your Lakewood tenants will cause you less problems. You will pay higher prices and taxes. The city will make you fix your property up to a higher standard in exchange for this you will receive higher rent and you should probably do better on your variable costs due to fewer evictions, less property damage and less drug usage.
Good point about property taxes, but FYI... it is illegal in Cuyahoga County for anyone to file a complaint for another, to reduce property taxes for compensation based upon the outcome (contingency).
Likewise, the county is very specific about who can, and who cannot file a complaint to reduce property tax for another. This becomes an issue if there is a hearing. There will typically be a hearing if the amount of requested reduction is significant.
I do file property tax complaints for my clients, and usually get a reduction. However as you suggested, I have to be prepared to have an attorney or licensed broker show up in the event of a hearing.
If you are saying that a NON-licensed person can NOT file on someone behalf with their fee based on contingency then I defer to your knowledge but your post reads as if all contingency based fees are illegal regardless of licensing.
I have gone through the process once (it was in Cuyahoga county) and while researching, spoke to several law firms that specialize in doing just property tax appeals. They all offered and promoted that they work on contingency. I had to push to get them to even discuss an hourly fee for their services (it was a slam dunk case). One was in the process giving a public seminar on the topic and outlined the contingency option when I met them so I would be surprised if they are doing something illegal.
Congratulations on your purchase.I currently have a property on W. 57 just a few blocks from Fulton. Great neighborhood. Sold two SFR properties there this past year.
Let me know if you ever want to discuss property management.