Why I sold Cleveland.
Those who have read my member blog articles are familiar with my journey.If you haven't, they're still there.
So I listened to the Grant Cardone BP podcast a few weeks before making my move into Cleveland multifamily apartments.He had warned listeners against investing in the snow belt.
I ignored him.
My opinion was that you could invest in hell as long as the numbers work.I still believe that.
In the end, it wasn't our numbers that were the problem.it was the devil that was in the details.
Within a few months of owning our 2 buildings, it became very clear that we had made a terrible mistake.
It was taking way too long to fill vacancies, evictions were a monthly fact of life and letters and notices from city council and the county never stopped coming in the mail.
The letters almost read like we were running a 5-star hotel in some of the repairs authorities required landlords to make, ranging from fixing intercom devices to relocating trash, among others.
Inspections were frequent and petty, especially if you commit the cardinal sin of accepting section 8/CMHA tenants.Yet you could almost certainly not achieve anything close to 90% occupancy in a C-neighborhood without accepting section 8, just forget it.
Then there were the water and sewer bills!
Oh lord, that was what broke the camel's back.No due diligence could have prepared us for the absolute rip off that was the water and sewer utility costs in Cleveland Heights.It was easily our largest expense month to month, even after we changed all plumbing fixtures to more economical ones.
There is an explanation for why Cleveland Heights pays more water and sewer utility than the city of Cleveland, but I'm no longer interested in that nuance and will not bore you with it.
Just know that your water and utility bills will be insane if you're buying in Cleveland Heights.Sellers will try all sorts of tricks to hide this during due diligence.Do not fall for it, request the last 12 months of utility bills from Cleveland Water.Minimum.
Treat the water bill like you treat rental income verification.You will thank me for it.
There will be those who would argue that we simply overpaid going in.
But after more than a decade in this business,I think I have a fair handle on value.Even in a hot market.
In the end, it was the ceaseless intrusion by local authorities into our business that killed our interest, not the snow.
We had invested in Florida for 10 years before moving into Cleveland. We are yet to receive a single official letter form any local authority on any of our Florida buildings till date.
Our 2 Cleveland buildings needed an entire separate file folder, just to keep up with all the notices we kept getting from the city.
I'm sure there are tons of local investors making it work and killing it everyday.But I will no longer invest in the mid-west.
I agree with Grant Cardone: I'm staying away from the snow belt and its crazy liberal governments.