Flips vs. Rentals in Cleveland: Lessons from Experience

If you've spent any time exploring Cleveland real estate, you've probably heard debates about flipping houses versus owning rental properties. As a seasoned real estate agent and investor in the Cleveland market, I've done plenty of both—and I've learned firsthand that each strategy has unique advantages, challenges, and profit potential.

Today, I'm sharing my personal experiences and insights from years of buying, flipping, and holding real estate right here in Cleveland. By highlighting real-life examples, practical lessons learned, and honest reflections, you'll gain clarity to help you decide which strategy best aligns with your financial goals.

My Journey: 100+ Flips and 30+ Rentals Later

Before diving into strategy specifics, let me briefly outline my experience to give you context. Over the past several years:

1. Flips: I’ve completed over 100 fix-and-flips, covering everything from quick cosmetic updates to extensive gut-renovations.
2. Rentals: I’ve built and managed a portfolio of over 30 long-term rental properties, ranging from single-family homes to multifamily units across Cleveland neighborhoods.

Strategy #1: Flipping Houses in Cleveland

What it is: Flipping involves purchasing properties (often distressed or undervalued), renovating them strategically, and quickly reselling at a profit.

Advantages of Flipping in Cleveland

1. Quick Returns & Liquidity:
Unlike rentals, flipping offers relatively fast cash returns, typically within 3–9 months. Cleveland’s affordability and steady demand can help investors turn around profitable flips quickly if they pick the right neighborhoods.

2. Instant Equity Building:
Flipping enables you to build substantial equity quickly, especially in neighborhoods experiencing rapid appreciation—think Ohio City, Tremont, Detroit-Shoreway, or even emerging spots like Slavic Village.

3. Fewer Ongoing Responsibilities:
Once you sell, you’re generally done. No tenants, no property management headaches, no late-night maintenance calls.

Challenges of Flipping in Cleveland

1. Renovation Risk & Complexity:
   With flips, surprises happen. I’ve personally experienced everything from hidden structural damage to unexpected permitting delays. Careful due diligence and conservative budgets are essential.
2. Market Timing Matters:
   If market conditions shift, you could face reduced profit margins—or even losses—especially in higher-priced flips or during volatile market periods.
3. Higher Tax Exposure:
   Profits from flipping are typically taxed as ordinary income, meaning you face higher tax burdens than rental investments.

Lessons Learned from My Cleveland Flips

1. Know your numbers: Always include generous contingencies in your rehab budget. I learned this the hard way after early flips went significantly over-budget due to unforeseen issues.
2. Choose neighborhoods carefully: The right neighborhood can significantly boost your flip’s profitability. Early flips in trendy areas like Tremont and Ohio City paid off enormously compared to lesser-known neighborhoods.
3. Manage contractors tightly: Clear scopes of work, firm timelines, and regular oversight help avoid costly delays and overspending.

Strategy #2: Owning Rental Properties in Cleveland

What it is: Buy-and-hold rental investing involves purchasing properties, renting them out to generate steady monthly income, and potentially enjoying appreciation over the long term.

Advantages of Owning Rentals in Cleveland

1. Consistent Passive Income:
Cleveland’s strong rental market provides reliable monthly cash flow. Neighborhoods like Parma, Lakewood, Garfield Heights, and Old Brooklyn have stable, steady rental demand from diverse tenant bases.

2. Long-Term Wealth Building:
Beyond cash flow, rentals offer long-term appreciation and equity growth. Over time, rents rise, mortgages get paid down by tenants, and your equity increases—helping you achieve true financial freedom.

3. Significant Tax Advantages:
Owning rentals provides numerous tax benefits—depreciation deductions, mortgage-interest write-offs, and the ability to use 1031 exchanges to defer taxes indefinitely.

Challenges of Owning Rentals in Cleveland

1. Management Intensity:
Even with great tenants, rentals require ongoing management: tenant screening, maintenance, repairs, evictions, and dealing with turnover. Property management companies can help, but they also reduce your profits.

2. Capital & Liquidity Constraints:
Rental investing typically ties up your capital for longer periods. It's less liquid, meaning you can't easily access your equity without refinancing or selling.

3. Vacancy and Turnover Risks:
Tenant turnover, extended vacancies, and unexpected repair expenses can significantly impact your annual cash flow and profitability.

Lessons Learned from My Cleveland Rentals

1. Proactive management is key: Thorough tenant screening and regular property inspections significantly reduce headaches. Over time, I’ve learned that avoiding management issues upfront saves far more money than cutting corners.
2. Neighborhood selection impacts turnover: Choosing neighborhoods with stable employment bases, quality schools, and community amenities helps attract reliable tenants who stay long-term, improving profitability.
3. Buy at the right price: Purchase prices significantly affect long-term profitability. My most profitable rentals were bought below market value and renovated to solid, durable standards—not luxurious, but tenant-friendly and easy-to-maintain.

Which Strategy is Best for You? Key Questions to Ask Yourself

Having tried both approaches extensively, here’s how I’d encourage you to choose:

1. Are you looking for quick profits or long-term passive income?
   If your goal is quick profits and you don’t mind the occasional risks of flipping, buying and flipping properties in high-demand Cleveland neighborhoods might be your best path.
2. How comfortable are you with property management and long-term ownership?
   If managing tenants, maintenance, and long-term financial planning appeals to you, owning rentals in stable neighborhoods will align better with your goals.
3. Do you prefer active or passive investing?
   Flipping demands active involvement—constant deal hunting, renovation oversight, market analysis. Rental ownership, particularly with a property manager, can be more passive and hands-off.

Final Advice from Experience: Why Not Do Both?

In reality, a balanced approach often works best. You can leverage profits from strategic flips to fund your rental portfolio. This strategy, one I’ve successfully employed, provides:

1. Immediate cash injection from flips
2. Steady long-term wealth creation from rentals

Ultimately, using flips to fund rentals helped me scale from a handful of properties to over 30 rental units quickly, comfortably, and profitably.

Conclusion: Making Your Cleveland Investment Decision

Both flipping and owning rentals offer excellent paths to wealth through Cleveland real estate. The key is clearly understanding your goals, strengths, and risk tolerance, then matching your chosen strategy to the right neighborhoods and properties.

If you’d like personalized guidance or have questions about flipping or rental investing in Cleveland, feel free to call or text me directly at 216-789-6736. I’m always happy to share my insights, answer your questions, or discuss your specific investing goals.

Happy investing!

Warm regards,
Jack Krusinski
Cleveland Real Estate Agent & Investor