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Posted almost 5 years ago

Cleveland Cash Flow 1 - the Real Estate Market Then and Now

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It may be cold in Cleveland, but rental real estate here is hotter than ever before. The city has been one of the hottest rental property markets in the nation for several consecutive years. Real estate people talk about housing inventory all the time, I wonder where they’re hiding it.

Growing up in Cleveland, I remember hearing my uncle talk rental property investing, and leisurely shopping properties on the weekends. Post-recession prices were so low you could buy a rental property for less than the price of a new car. It’s too bad I was still in high school chasing girls and soccer balls around back then, I could have used the equity gains.

Times have changed. Prices in most neighborhoods have doubled since 2012, and my uncle is leisurely buying no more. (Well, sort of. He bought an elderly lady’s house for pennies last year, but that’s a once in a blue moon kind of deal. More on this later).

Over the past few years, I have been watching long-time local investors take a seat on the bench, as out of state and foreign investors buy up everything in sight. Fair priced investment properties are selling like hotcakes. Tenanted and cash-flowing properties are selling within days on market, and that’s if they make it to market.

To the locals, it’s all overpriced. They’re comparing today’s market to 2012, back when a $25,000 property was a feasible investment. To the outsiders looking in, Cleveland is cheap. They’re comparing it to their hometowns. It’s no surprise rental property is selling fast; property here is cheaper than raw land in many states and countries.

So what’s all the hype about?

Well, Cleveland has rebounded quite a bit since the recession. The city has come alive, the number of new development has increased tremendously, and millennial crowds are flocking in to live in and around downtown in neighborhoods like Tremont and Ohio City. If you had bought a property in Ohio City for $100,000 back in 2010 and sold it this morning, your money would have near tripled! Go millennials, you’re doing it right.

But the real hype, and the reason why everyone is buying in Cleveland, is Cash Flow. Cash flow is king. We live in a renter nation, and Cleveland is near the top of that list. You can buy a sub $100,000 property that rents for $1,300 per month, and walk away with some spending money after all the bills are paid.

Now to the essentials; not every property you see on the market is a good deal. In fact, most are not, that’s why they’re on the market. Before jumping in and buying, do your homework, familiarize yourself with the neighborhoods, study market rents and track property values. Invest the time to research as this is the most important step. During your market research phase, start by connecting and building your team of service providers, they can help you on your search for cash flow and will be your eyes and ears on the ground once you close on a property. If you’re not local, this step is extremely critical. Write this sentence down and remember it, text it to your best friend at random hours, and live by it on your first deal.

“The quality of your team will determine the level of success you have in Cleveland rental property investing.”

Now that you have researched the market and built your team, it’s time to look at deals. It’s important to keep disciplined with your underwriting, and look at as many deals as you can. Trying to force one deal to work will come back to hurt you. In fact, your biggest problem is not having enough deals to look at. Control your urge to buy anything and everything, since, again, most of the deals to cross your desk (or inbox) will be trash.

Next is deal sourcing, this is where you must get creative and not settle for just any deal that comes your way. Relying on your local realtor to find you deals won’t cut it in this market. By now you would have already completed your market research and know enough about the market to judge a good deal from a dud. Getting lazy and skipping that critical step makes you a target for shady providers to sell you junk deals since you’re new, clueless, and out of town. Don’t be that investor. I recommend connecting with other investors, brokers, wholesalers, property managers, auctioneers, and anyone connected to real estate. Fill up your deal pipeline. Do you think my uncle landed that elderly lady’s house relying on one source? No chance. This deal was off-market, an online auction site in fact. Get busy, fill up your pipeline.

Real estate is an exciting and very lucrative vehicle to amass great wealth and cash flow when done correctly. Over the last two centuries, about 90 percent of the world's millionaires have been created by investing in real estate. This short read is in no way meant to discourage you from buying, it's simply a guide and word of caution as you’re just getting started. Now it’s your turn to grow your rental property portfolio. Study the market, build your team, and get busy buying.


About the Author

Jad Boudiab is the CEO at B2B Realty, a Cleveland based real estate & property management company servicing local and out of town investors. Jad is an Ohio licensed real estate broker, a sales coach, and small to mid-sized apartment investor. He has consulted with hundreds of private clients on their investing strategies in Cleveland, and helped many new realtors and investors find their way in real estate.



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