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 am in contract for my second duplex in OH. This one is in Parma 44134 zip code and few blocks from the Ukrainian village and with good access to 480.
Purchase price: 100 K plus a 1-3 K of repairs. Potential rent : 1500 for both units
Hoping its a good buy long term, if there is anything I need to consider, would appreciate additional advice.
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
I am in contract for my second duplex in OH. This one is in Parma 44134 zip code and few blocks from the Ukrainian village and with good access to 480.
Purchase price: 100 K plus a 1-3 K of repairs. Potential rent : 1500 for both units
Hoping its a good buy long term, if there is anything I need to consider, would appreciate additional advice.
Parma is my favorite city to invest in. The prices are higher than Cleveland but the tenant quality is much better.
I like Parma as well, but just know your paying retail value for those duplex's. not necessarily a bad thing, but make sure you plan on holding them for at least 5-10 years so you can get out of them without a loss if you need to. You barely pay down any principal on those mortgages in the first 10 years, so unless we see a lot of appreciation you won't have much equity.
I would also want to know they were in excellent condition, as at those price points they should be turnkey. There are better values out there, but generally the better deals get snatched up by cash buyers, so if your financing it is harder to get your hands on them.
Good luck to you! Sounds like a couple of solid investments overall.
Thanks @Isaac Rowe,
Right now, my plan is to keep each property for min 5 years.
great point about not paying much in the first 10 years. I am getting only 15 year loans as its important for me to build equity rather than focus on pure cash-flow. I got a 3.875 mortgage rate for 15 year (slightly higher for duplexes than SFH). Also, after putting down some of the rental cash flow for future cap-ex, if I get any extra cash flow for each property , I am looking to pay off principal at year end.
Also, posted a few issues from the inspection here , https://www.biggerpockets.com/forums/311/topics/33...
Apart from these issues, property is in good condition.
Love the 15 year mortgage. Most investors don't do that.
Folks
I am in contract now and these are the details.
Purchase price: 81K
side by side duplex , built 1953, each unit is a 2/1
one unit rents for 680, second one is getting vacant soon and could rent for around 700 PM
The home needs no work and has been kept in good condition.
Location: Fulton Pkwy,Brooklyn, OH 44144 close to Cleveland zoo.
Any feedback on this duplex purchase.
Negatives: no basement or garage
Positives: decent location, no crime and in good condition.
Thanks
Hey Sunny, want to give an update to BP community how this deal panned out?
Sure @Federico Gutierrez
BP-ers if you are interested in how my Cleveland adventures have been panning out.
I had closed on a duplex in Old Bklyn last month and was in the lookout for one more. I have been exchanging ideas with Federico for properties in Lakewood and Parma.
My criteria for the new search was to ensure that it had a recent roof and some fixes (carpet etc.) were fixed recently by seller. I only take 15Y mortgages and they need to meet my 1.5% rule for B/good C areas (2% rule only exists in much worse neighborhoods), almost zero crime and purchase price in 70-100K range.
Got notified of this property on MLS, Federico was not available as he was travelling out of state but he managed to get his buddy at Holton Wise to check out over weekend and we made a strong offer within 3 days of it being on market. We went in contract within a week of listing. Seller is overseas and if we didn't have a competing secondary offer we would have been in a better position to negotiate. The main reason why I continue to look at Cleveland is the presence of a professional and investor friendly brokerage- Holton Wise. The approach to purchase is very transparent unlike what I went through a turnkey purchase earlier on as the process is similar to other mls purchases. I am hoping eventually am in a position to acquire mls purchases at a discount in same areas by focusing on bank owned properties.
Cheers
Sunny
I am a CA based investor who has invested in the Midwest recently (Grand Rapids, Indy). I have been curious about the Cleveland area. It sounds like there are many people who enjoy investing in the Parma area. How are the taxes and insurance rates in that city/county? For a 100k home in a sold B+ area what kind of ROI should an investor expect after accounting for Vac,Cap Ex, maintenance?
Thank you for your local knowledge!!
@Justin R. a $100k SFR will not bring you optimum returns. You'll find Parma doubles in the 95-120k price range with cash on cash returns between 8 and 10 percent with 8% vacancy and 10% for CapEx and Maintenance. Parma provides a rare mix of high tenant quality as well as solid returns.
For a single family to make sense, you'll need to be purchasing in the 60-80k price point, which too is achievable in Parma.
Im willing to give a few ROI for higher quality tenants. Maximum ROI = Maximum Headache (typically.) How high does the one percent rule climb in the greater Cleveland area? Could a 160k home produce 1600 gross rents?
Do you suggest any one stop shops (REA,Construction,Prop Mgnmnt) in this area that specialize in investors? Im weary of many of these companies due to their inflated pro forma, and over priced management fees.
Justin
You can target the 1.5% rule in Parma if you are willing to be patient. It took me 3 months after I first contacted Federico before I got my first duplex. 160K 1600 returns are too low. I suggest you target two 80K SFH that can rent for 1150-1200 or a 100-120K+ duplex that can rent for 1500.
No one is better than Holton Wise there @Federico Gutierrez @Jad Boudiab. If you are looking to go all cash and find below market deals talk to @Isaac Rowe. Regd PM fees, if you are more hands on and have your team OTG its likely that you can get the maintenance rehab work done for 50% cheaper , its not worth the hassle if property is in good conditions and repairs are a few thousand $.
I have been tired of inflated pro formas and also incorrect comps being used to sell the properties. This is true in most markets that have a heavy turnkey presence.
Cheers
Sunny
Cleveland is on my short list of potential markets as a buy and hold investor, after having researched for awhile now, it seems it's one of the few left that the margins are not razor thin with investors flocking to areas like Dallas, Jacksonville etc and that isn't a high crime high risk area like Detroit or Baltimore.
My issue here is that I don't have anyone "on the ground" , I've proven adept at scouting my local markets for deals via abandoned homes, absentee owners, foreclosures etc but the key there is that it's "local". Having dealt with my fair share of unreliable contractors, apathetic real estate agents, problematic lenders I am weary about attempting to "build a team" when I can't personally vet these individuals like I could here, throw in the issue of trust and potential for scams, and it makes me weary. Turnkey margins are just not worth the opportunity cost in my experience. I'd be more interested in getting distressed properties in B +/- areas need of renovation / refresh - done responsibility and filling them with great tenants that would be treated fairly. It's a little more capital and time intensive up front, but ultimately a safer deal long term.
Any advice/experience as to how to implement this strategy without personally being on the ground day to day would be appreciated.
@Matthew Augustine don't mean to self promote here, but this will help get the point across.
I'm not recommending you jump into a market, hire an agent, google a property manager, and call it a day. Rather take your time to find local experts to help you find what you're looking for. Screening is not only for tenants, but for business partners alike. Search for reviews and ask about the experiences of everyone who will be apart of your on the ground team. Many out of state investors are comfortable working with us at Holton Wise simply because of our track record. We may not be the perfect fit for everyone's plans, but hey that's a start. You'll need the right agent who can handle investment properties and thinks like an investor. You'll need an established property manager who has presence in the market. This one is more tricky without connections, but you'll need a local contractor whom you can trust to do the work and do it correctly.
There's no other way of going about investing out of state that will make sense, you have to build a team, and how you go about choosing the team will definitely affect your bottom line.
Im willing to give a few ROI for higher quality tenants. Maximum ROI = Maximum Headache (typically.) How high does the one percent rule climb in the greater Cleveland area? Could a 160k home produce 1600 gross rents?
Do you suggest any one stop shops (REA,Construction,Prop Mgnmnt) in this area that specialize in investors? Im weary of many of these companies due to their inflated pro forma, and over priced management fees.
Sunny is correct, your $100k double should bring in rents of $1,400-1,600 per month. If you're not around the 1.5% mark for a duplex, you're either paying too much or are investing in an A grade neighborhood which always bring lower returns but higher quality tenants.
Folks
I am in contract now and these are the details.
Purchase price: 81K
side by side duplex , built 1953, each unit is a 2/1
one unit rents for 680, second one is getting vacant soon and could rent for around 700 PM
The home needs no work and has been kept in good condition.
Location: Fulton Pkwy,Brooklyn, OH 44144 close to Cleveland zoo.
Any feedback on this duplex purchase.
Negatives: no basement or garage
Positives: decent location, no crime and in good condition.
Thanks
Sunny, wanted to follow-up and see how your investment is going, if you closed your deal ?
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
Chheang I would encourage you to look at CLE, the taxes are not nearly as aggressive as you have noted. Many neighborhoods around NE Ohio that offer a very favorable tax rate, that is easy to bear and offers a good balance of risk and cash flow.
I like Parma as well, but just know your paying retail value for those duplex's. not necessarily a bad thing, but make sure you plan on holding them for at least 5-10 years so you can get out of them without a loss if you need to. You barely pay down any principal on those mortgages in the first 10 years, so unless we see a lot of appreciation you won't have much equity.
I would also want to know they were in excellent condition, as at those price points they should be turnkey. There are better values out there, but generally the better deals get snatched up by cash buyers, so if your financing it is harder to get your hands on them.
Good luck to you! Sounds like a couple of solid investments overall.
Isaac, great point! I think the condition is the ultimate driver in this case, if the homes are updated and remodeled - they should be able to produce some steady cash flow. I think it is important to consider the quality and condition of the property as it will also drive the tenancy pool.
Folks
I am in contract now and these are the details.
Purchase price: 81K
side by side duplex , built 1953, each unit is a 2/1
one unit rents for 680, second one is getting vacant soon and could rent for around 700 PM
The home needs no work and has been kept in good condition.
Location: Fulton Pkwy,Brooklyn, OH 44144 close to Cleveland zoo.
Any feedback on this duplex purchase.
Negatives: no basement or garage
Positives: decent location, no crime and in good condition.
Thanks
Sunny, wanted to follow-up and see how your investment is going, if you closed your deal ?
Closing next month, looking for a contractor for some small fixes around chimney and electricity grounding outlets etc
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
Chheang I would encourage you to look at CLE, the taxes are not nearly as aggressive as you have noted. Many neighborhoods around NE Ohio that offer a very favorable tax rate, that is easy to bear and offers a good balance of risk and cash flow.
Thanks for the note @Steven Gesis. Any neighborhoods you'd suggest? I see Pharma, Euclid and a few others that people are flocking to. During my eval of a few of the homes that the turnkey companies were advertising, I looked up tax info and it was pretty steep. I recall like 3k to 5k for a 60k home that'd rent for 900/month. Are there areas that you'd suggest? I appreciate the advice and help. Thanks!
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
Chheang I would encourage you to look at CLE, the taxes are not nearly as aggressive as you have noted. Many neighborhoods around NE Ohio that offer a very favorable tax rate, that is easy to bear and offers a good balance of risk and cash flow.
Thanks for the note @Steven Gesis. Any neighborhoods you'd suggest? I see Pharma, Euclid and a few others that people are flocking to. During my eval of a few of the homes that the turnkey companies were advertising, I looked up tax info and it was pretty steep. I recall like 3k to 5k for a 60k home that'd rent for 900/month. Are there areas that you'd suggest? I appreciate the advice and help. Thanks!
Chheang, I know I am going to start a storm here:
I think its not only about neighborhood, you have to consider the sub markets within the neighborhoods, it certainly helps to better understand your plan. Are you seeking to be somewhat hands-on or simply a remote investor looking for good consistent cashflow?
Once you truly answer that question, I think you can better define area and sourcing. If you want something hands-off I always encourage a consideration to Turnkey, many argue you are paying a premium, no premium is a real turnkey, this is a market driven price if you are financing, the value will be provided through the appraisal, so it will be evident quickly whether the home is being sold at a premium or not. The reason I present this situation, is that you want a full accountability, especially if you are out of town, so simply buying something off the open market off the MLS, with a Property Manager partner, you are missing the most critical component, the physical construction support and maintenance support, that is not real true turnkey. Most Turnkey is off market, no premium, real Turnkey is not a process it is a cash flowing property with an existing tenant, no placement fees no realtor fees on acquisition, this is real turnkey. Now that is out of the way, we can talk about the neighborhoods.
I am not a West Side of Town guru, I am however an East Side of Town guru :) What I know about the West Side is if you want to play in the similar neighborhoods, you will not get the same value and rent rate as you will on the East side, based on my experience. West side is nice, East side is pretty amazing though, a lot of generational wealth, major shopping hubs, all major hospital systems are on the East side (Cleveland Clinic, University Hospital) - all major Universities are on the East Side of town, as well as the greater majority of the fortune 500 companies. Cannot get the same values/rental investor ratios in good quality neighborhoods on the West side as you can on the East Side of town.
I do not play in the lower spectrum of neighborhoods or home prices such as $40-70K with under $1,000.00 rent, just not my cup of tea, I have several homes in my portfolio remaining from that novice/beginner time point in my investment life, but as I have evolved, so have my properties, in category and quality. The biggest lesson learned to date has been the standardization of the construction materials, quality and methodology. To layer that a little deeper, its all about resilient materials, most important NO CARPET!!!!
Always remember, everyone has a different strategy, it just depends what your strategy is, and what fits your risk profile.
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
Chheang I would encourage you to look at CLE, the taxes are not nearly as aggressive as you have noted. Many neighborhoods around NE Ohio that offer a very favorable tax rate, that is easy to bear and offers a good balance of risk and cash flow.
Thanks for the note @Steven Gesis. Any neighborhoods you'd suggest? I see Pharma, Euclid and a few others that people are flocking to. During my eval of a few of the homes that the turnkey companies were advertising, I looked up tax info and it was pretty steep. I recall like 3k to 5k for a 60k home that'd rent for 900/month. Are there areas that you'd suggest? I appreciate the advice and help. Thanks!
Chheang, I know I am going to start a storm here:
I think its not only about neighborhood, you have to consider the sub markets within the neighborhoods, it certainly helps to better understand your plan. Are you seeking to be somewhat hands-on or simply a remote investor looking for good consistent cashflow?
Once you truly answer that question, I think you can better define area and sourcing. If you want something hands-off I always encourage a consideration to Turnkey, many argue you are paying a premium, no premium is a real turnkey, this is a market driven price if you are financing, the value will be provided through the appraisal, so it will be evident quickly whether the home is being sold at a premium or not. The reason I present this situation, is that you want a full accountability, especially if you are out of town, so simply buying something off the open market off the MLS, with a Property Manager partner, you are missing the most critical component, the physical construction support and maintenance support, that is not real true turnkey. Most Turnkey is off market, no premium, real Turnkey is not a process it is a cash flowing property with an existing tenant, no placement fees no realtor fees on acquisition, this is real turnkey. Now that is out of the way, we can talk about the neighborhoods.
I am not a West Side of Town guru, I am however an East Side of Town guru :) What I know about the West Side is if you want to play in the similar neighborhoods, you will not get the same value and rent rate as you will on the East side, based on my experience. West side is nice, East side is pretty amazing though, a lot of generational wealth, major shopping hubs, all major hospital systems are on the East side (Cleveland Clinic, University Hospital) - all major Universities are on the East Side of town, as well as the greater majority of the fortune 500 companies. Cannot get the same values/rental investor ratios in good quality neighborhoods on the West side as you can on the East Side of town.
I do not play in the lower spectrum of neighborhoods or home prices such as $40-70K with under $1,000.00 rent, just not my cup of tea, I have several homes in my portfolio remaining from that novice/beginner time point in my investment life, but as I have evolved, so have my properties, in category and quality. The biggest lesson learned to date has been the standardization of the construction materials, quality and methodology. To layer that a little deeper, its all about resilient materials, most important NO CARPET!!!!
Always remember, everyone has a different strategy, it just depends what your strategy is, and what fits your risk profile.