All Forum Posts by: Adriaan Sierra

In my opinion, the thing that you have to be the most wary in Cleveland is location. I'm sure James Wise will promote his guide here soon enough. That's a start.

The city has had 15-20 years worth of population decline so there are many areas with essentially worthless properties. These are the kind of properties that would look amazing on paper ($60K with tenants making it a 30% cap rate) but could be terrible investments.

mmmmm....One tip about doing out of state. If I were you, I wouldn't do it. Most out of state investors are looking for affordability and have to pay a big premium to do the out of state gig. Your whole strategy would live or die by how good the out of state team is, so you would need to do some heavy research here, and not be cheap if need be. I think this is where most people falter.  

This strategy can make sense if you come from a major city, as they tend to have unfriendly landlord laws, low affordability, low rent to value ratios. It is literally impossible to find a cash flowing property where I live. 

That is not the case for TN. Our top runner for an investment city back in the day was Memphis, before I ultimately went with Cleveland. You can play with home advantage, I would advise you to use it.

Presumably you hire the PMs to advice on the best course of action with the repairs themselves. A seasoned professional would know more about the needs to make your property work. Do a hard vetting on that part of the funnel, but I wouldn't second guess their recommendations once you decided (unless replacement is in order).

LOL.

Let's put * check notes* thousand of dollars, into a venture with a friend. What could possibly go wrong?

The loan will always be "cheaper" in a spreadsheet as leverage means very few bucks in, which would always increase your return on investment. Mortgage interest payments are tax deductible to some extent and a fixed monthly payment decreases in real terms, so those are all arguments for high leverage.

That being said there are no free lunches here. Higher leverage means higher risks, higher monthly fees and fewer equity means that you are just one bad shock underwater, so that is another thing to balance. 

Different people have different philosophies and only time will tell if they were right.  For example, Dave Ramsay advocates never using leverage. This strategy would make you move at a glacial pace, but it guarantees survival from ruin. Most people that you see in the BP podcast "from 0 to 80 units in 3 years" are jacked in leverage, they are all paper millionaires, but we will see if they make it next year...

If you are thinking of refinancing later that is essentially a speculative bet on where interest rate will go in the future. 

Thanks, particularly relevant as we move to a buyer's market

I can't open my milk carton. Can you help me?

You probably won't have MTR in Cleveland in anything but an A neighborhood, which will command a premium. All to say that the "low entry cost" of Cleveland is not a plus with your stated strategy.

A health professional will seek a great housing experience, so buying in place where crime, age of homes and pop growth decline is a concern, would not be wise.

seems like you are about to pick some pennies in front of the steam roller...

However, If you plan to do this, you need to heavily vet the tenants. Maybe make sure they are rock solid and they report issues on time. You might be able to self sustain that way, using task rabbit some of the trivial task.

However, this doesn't work with an eviction or filling a vacancy. For that you will probably need to travel

Numbers seem about right. You can shave off a couple of hundred from the last three items as well as the utilities mentioned. That would barely put you on cashflow positive. The numbers would have looked much better 6-8 months ago. 

With more volume you could improve all of the figures; e.g. if you have say 10 units I bet it be easy to lower the PM fee to 10% flat.