All Forum Posts by: Andrew A.

@Quandra Adams 

Hey Quandra!  Thanks for your question.  Yes I did do the BP calculator for rental property to ensure that my cashflow and cash on cash return would work out.  However to be honest, these are just rough estimates and you really don't know with any precision the capital expenditures that will accrue once you first take possession of the property.  When I landed in Cleveland and arrived at the property, I ensured that all the locks were changed and that in itself costed around 200-300 dollars.  About 8 doors rekeyed.  Then I took a closer look at the carpet and realized how old and dirty they were.  Whatever expenses you calculate, I would add some cushion for these expenditures.  Also, I don't know where you will be investing but taxes are quite expensive here in Cleveland.  Be sure to factor that in as well. If investing in a cold climate location,  I'd also call the gas company to provide you with the average gas bill for the past 12 months to get an accurate estimate of the Utilities for your property.  There's a lot more advice I can give but believe in yourself and your diligence and go for it!

House Hack: Buy a multifamily.  Live in one unit and rent out the other unit(s).  

I'm in my 30's, introverted, enjoy my own privacy, and value my sleep like no other. I was in San Diego, found a great deal on the MLS, made the phone call to my agent and bought a duplex in Cleveland. One plane ticket and over a year later, here I am sharing my experiences and recommendations with you.

IT'S JUST LIKE BEING A TENANT IN A RENTAL?

Hell No!  You have to be the change you want to see.  I find myself being much more cognizant of my behavior than when I was just a tenant renting an apartment.   As a landlord living in the same building as the tenant, I feel much more cautious of my presentation outside of my unit.  I'm constantly self aware of my noise level, behavior, presentation, image, time spent home versus away because I'm paying attention to these things of my tenant.  Maybe I'm just sensitive to being a house hacking landlord but it definitely does not feel like being a normal tenant.  There's much more self awareness as an enforcer of the house rules and local ordinances/regulations.  Keep in mind I'm a low maintenance type that just enjoys the freedom of walking out with my sweats and a T to work out and start my day. 

SCREENING

It's not just a rental, it's your primary residence. Take extra care who you choose to be your neighbor. It may be quite different than just a 4 unit Turn Key rental you acquire. This is your home.  Remember that stomping neighbor upstairs or the one who always kept their door open with loud TV blasting while you were a "renter"?  Now the power is in your hands to prevent that from happening again.

MICRO NEIGHBORHOODS

If you are going to house hack, it needs to be in a neighborhood that you would feel comfortable living in.  But lets be real, oftentimes the neighborhoods that we can afford to buy usually is in a rougher neighborhood than the areas we choose to rent.  Those gentrifying areas with bigger upsides are generally the target for many house hackers.  Having house hacked in a class C neighborhood of Cleveland, I realize the importance of micro neighborhoods.  A broad brush can't be swiped over a block by block gentrifying neighborhood.  Sometimes a neighborhood has a really nice block of great residents like you and cool architecture.  If you have a chance to get intimate with the micro-neighborhood that you are planning to call home, it will increase the chances of enjoying the house that you are hacking.  

INTROVERTED vs. EXTROVERTED HOUSE HACKERS

Introverts:  I find that as an introvert, it's easier to maintain that "space" between a landlord and a tenant.  We are less water-cooler type and kinda get to the point.  I find that over-communicating (from an introvert's perspective)  is crucial in maintaining a healthy living environment to be on the same page of expectations.   I know at times I can assume that the tenant read the lease agreement but to be vocal on the restrictions like "no smoking" and "quiet hours" and "common areas" is very important for the quality of life of the residents.  Emails might be a preferred method to communicate for introverts than knock on the door face-to-face.  

Extroverts: Since you are good with the socializing and chit-chat, you can make anything seem non-offensive and tactful.  This can help to create a good relationship with the tenant.  Just keep in mind that this is still a Landlord-Tenant relationship and that your points need to be well communicated and understood amidst the side conversations about the Caveliers and Indians game.  :P

LEASE AGREEMENTS

There are many generic lease agreements out there but make sure to include items that are specific to your property!  In Cleveland we have a lot of doubles with shared porches as an entrance.  Make sure to spell out how folks behave on the porch.  If you don't fancy coming to your home welcomed by topless folks, Budweiser and cigarettes on the porch, make sure to set rules for the common areas.  

AGE IS NOT JUST A NUMBER

House Hackers in their 20s

Young bright eyed and bushy tailed, just do it.  Dorms in college, hostels when traveling, you're used to shared living. Understand that there are tenants from many walks of life and it's important to respect common house rules per the lease and local ordinances.  Playing video games until 2am and going out on the weekends might not be their cup of tea lol (sarcasm).  The lease agreement is your bible, just ensure everything adheres to it.  

House Hackers in their 30s + 

Our space and privacy is important to us.  We have grown accustomed to a certain way of living and we have higher standards.  However we are less tolerant of things that we don't want.  It may be more challenging because our expectations of our living space is higher at this point.  One thing that I have difficulty with is children noises during play and screaming.  Especially on long plane flights.  This also happens more so in your house hacks.  There may need to be some compromise and understand as a wise 30+ year old, we were all once children but have boundaries on quiet time etc.  

HOME OWNERS INSURANCE or LANDLORD INSURANCE for HOUSE HACKERS

I learned that if you are house hacking, it's your primary residence and you should get Homeowner's Insurance to protect your personal assets.  Also this will allow you to Refinance your primary residence so you can continue to invest and reach your real estate goals.  

CLOSING THOUGHTS

I'm glad I house hacked in my 30s.  I know the ins and outs of my property, neighborhood and tenant pool.  I know the threshold of sound that transmits between walls that can be potentially annoying to future tenants.  I know that my shower gets hotter when the tenant flushes the toilet.  Is house hacking right for me?  Well, I play the violin, I do woodworking, I value my sleep, privacy and freedom.  For me it's a short term learning experience in which I can use for my next project to help me reach my real estate goals.  It's not my preferred living experience in my 30s but I'm looking at the bigger picture.  

Would you house hack? If you are house hacking, share with me your experiences.  If you are thinking about house hacking, share with me your concerns.  

@Thomas S.

Thanks so much for sharing your system and mentality.  I agree we need to do these to protect our asset/property.  The tenants may actually like the routine inspections because it shows that we care about the condition of their living space and safety.

For most of my adult life, I was a renter and I noticed sometimes landlords would do some sort of "maintenance inspection" once a year, sometimes multiple times a year and sometimes, never.  

As a new landlord in Cleveland, I completely forgot the importance of a routine inspection and decided to do one annually.  Keep in mind before the tenants moved in, the apartment was completely remodeled with brand new carpet, refinished floors and paint.  Here are my observations:

Tenant appliances installed inadequately

It's common here in Cleveland for tenants to bring their own appliances (window AC units, Washer, Dryer etc). I noticed the dryer vent was installed incorrectly because the space is tight and hard to get access to. Without going into the potential hazard of dryer air venting back into the house (mold, health issue), if tenants would be bringing and installing their own appliances, I think it is very important to immediately inspect the installation.  Also I'd check if during the summers, the window AC units are secured properly as well.  Window units are very common in Cleveland and having installed some myself, it can get quite extensive with the older colonial windows + aluminum storm windows and I always worry that it may somehow fall and knock someone out!  Also which window they choose to install the unit may be important as well.  

Smoke alarms can sometimes be removed or relocated

Make sure to check all the smoke alarm locations to see if they are functional and intact!  If the tenants removed it near the kitchen, it may be due to nuisance alarms during cooking which you can adjust accordingly.  If it's tampered with in the bedrooms, perhaps there may be smoking involved (check your lease agreement for non-smoking clause).  Make sure to follow your local ordinances on smoke alarms.  As a rule of thumb home depot 

The spaces that I had created are used in a completely different manner by the tenants than I intended.  

One room intended to be a dining room can be an office for them.  That little closet that you thought would be neglected is being used to the max, literally overflowing.  The basement that you thought would remain clean and empty becomes the storage space for any miscellaneous items.  Just keep this in mind for the next tenant as well.  

Wear and tear, scratches and some marks on the wall

I'm a little bit OCD when it comes to aesthetics, especially walls, you start noticing all the little dents (maybe from moving furniture in) etc.  These are easy fixes but makes you realize that rentals are a different beast and durability should be priority.  I went with a dark stain for the hardwood floors to even out the color imperfections of the hardwood floors but I think next time, I'd just stick with natural wood + poly.  Any nick exposes the light bare wood and screams.  Also that fresh new carpet smell and look will likely not last over a year.  This also speaks to my other post on Regional Tenant Culture.  A lot of BP-ers seemed to have liked that discussion.  

CONCLUSIONS

I was thinking about how often a landlord should do an inspection.  I think an inspection shortly after move the tenants are settled into the apartment and everything is set up correctly increases the likelihood for a safe clean tenancy.  It's also a great time to answer any questions or concerns that the new tenant may have (regarding common areas, lease agreement, wrapping up loose ends).   After that I think every 6 months to a year depending on how you feel about the tenants would suffice should no other issues arise.   I think inspections actually keep a healthy relationship showing your concern for keeping the property in good condition and hopefully the tenants would have incentive to maintain the property in good condition as well, knowing how much you care and the periodic vigilance.  

I share my experiences during these crucial nascent stages here because sharing during the process in the trenches is more valuable and relatable to people in the same boat or a few steps behind me.  I can't relate to Grant Cardone at this stage.  So  I encourage you to share your thoughts on Landlording Inspections too!  How often do you conduct routine maintenance inspections?

@Ryan Arth 

Thanks for your comment.  I do agree that tenant quality tends to improve as you go up the tiers of neighborhoods/price point but more broadly speaking I do think there are regional differences in Rental Culture of the tenants.  

@Justin R.  

Thanks Justin for your feedback.  I noticed you're from SD, North Park forever!  lol.  Miss it there.  San Diego rental pool is great and not many people on here may know, it's quite transient as well with military base and folks who just want to experience the most comfortable climate in the US.  The hug your tenant gave you just goes to show how grateful she is to have landed an apartment in SD.  I know exactly how that feels when I got accepted for a studio apartment in Union Square San Francisco.  Feeling of joy, relief and gratitude.  

@Dan H.

Thanks for your input.  I think eviction in California in general is not as high as it is in Cleveland.  Landlords here I think are more quick to evict when issues arise.  Maybe this speaks to "Regional Landlord Culture" lol.  But also the types of properties are quite different too.  We have a lot of duplexes (side by side or up and down) here in Cleveland.  San Diego has a lot of apartment "complexes" right.  I feel like if the tenant culture is not right for a renter in San Diego, they kinda get voted off the island naturally and voluntarily leave.  I think a duplex dynamic is quite different.  

So it's been over a year here in Cleveland since I booked my one way flight from San Diego California.  I decided to come to Cleveland with my savings without a job but with a goal to earn passive income through real estate investment.  Nice safe transition right? I wanted to experience the Cleveland investor life first hand and have a few observations that I'd like to share/discuss.  

I also wanted to get a face check from BP members of my observations as a landlord because I don't think people really talk about Regional Tenant Culture.  I've been a renter for most of my adult life and this was the first time I wore the other hat as a landlord witnessing the tenants from a landlord perspective.  

My first experience as a landlord in Cleveland made me ask myself.:

WAS I LIKE THIS AS A TENANT?

I probably was worse than I'd like to think but probably not as bad as the renters I've experienced here in Cleveland.  I think it has to do with the Tenant Culture that is specific to this region.  I think there's more to it than just "class A, B, C" neighborhoods...it has to do with the acceptable culture of how a tenants treat their living space.

WHY?

Being Grateful due to Scarcity

I lived in dense cities all my life where competition for living spaces are high (Sao Paulo, San Francisco, LA, Seoul etc):  To be able to land a place for rent itself is a feat and if we do, WE ARE GRATEFUL.  With a grateful mindset, I think we value and treat our space with more respect.  Show it off, maintain it, <3 it, rinse, repeat.  Look at all those youtube videos of people showing off their tiny studio space in New York that they pay $2000 a month for.  I noticed that in Cleveland, vacancies are a dime-a-dozen and this abundance at a low price I feel affects how Tenants view and treat their apartments.  It loses perceived value.  This affects Regional Tenant Culture.

People that Would Rent Instead of Buying a 40k House

Expensive cities, we are forced to rent.  It's way too competitive and expensive.  However in Cleveland, one must ask who are the folks that are choosing to rent instead of buy and among those individuals the type of culture they embody in treating their living space.

Drug and Substance Abuse

This is a big issue globally, but it gets real here in Cleveland.  There has never been a conversation about a property being a "meth lab" or smelling alcohol during a showing since I started investing in Cleveland.  Keep in mind this happened while I was at a showing in Parma, a suburb of Cleveland.  The neighbor literally had a sign on the window pointing to the showing house "Was a meth lab".  If a tenant can't take care of themselves, they really can't take care of anything else, including your property. 

FINAL THOUGHTS

Cleveland is a popular market for out of state investors who are starting to invest due to the price point. I still think Cleveland is a great market to invest for buy and hold.  HOWEVER, a landlord in Cleveland must understand the regional tenant culture and take extra care and diligence in screening the tenants.  Also extra precaution is needed when deciding what properties you buy, down to the block, to attract good tenant culture.  

In the end, I'd much rather keep my apartment vacant than have it occupied by tenants with a culture and mentality towards their living space that doesn't align with my standards.  

@Joseph Todd  

Eyy..I'm from Santa Monica too...well that's where I grew up...went to Samohi and all.  

I just moved to Cleveland a year ago to invest.  Most here will say Columbus because it's the biggest city in Ohio and they finally built an IKEA...RIP.

I kinda think Columbus is like Dallas, people already came and ate it up.  It's hard to get any good deals worth the tenant pool that you are trying to attract.  But I do feel that with a bigger population and more attractions comes more power to the landlord, you have a bigger pool to be selective with.  You'll get a better cap rate in the smaller cities like Cleveland and Cincinnati but the tenant pool might not be as strong.  

And their's no washer dryer in the facility?  That speaks to the tenant pool.  

I think Lender One also has a 75k purchase price minimum as well. Points, Doc fee, appraisal fee, 20% down.

 If you find an good local HMLs that fund the cheaper deals, let me know as well! 

I actually did my first 203k FHA construction loan in Baltimore back in 2008. People would always say Philly is just a bigger Baltimore. I moved at the end of 2016 to Cleveland to start investing in real estate and bought a Multi and an SFR to flip.

I think Cleveland and Philly really can't be compared considering Philly more than triples Cleveland's population size.  This speaks to tenant pool size, quality and demand for rentals.  Cleveland and Pittsburgh would probably be more of a comparable comparison.  

With that being said, as a California boy, I noticed some things that these cities have in common, it's a city of charm and micro neighborhoods, almost as if they drew an invisible line to separate the good and bad areas (around Cleveland heights, Lakewood border etc).  In Baltimore it would be the Reservoir Hill Bolton Hill border near Johns Hopkins etc.  I've never seen boarded up houses to the extent that I have seen in these cities butting right next to nice areas of Cleveland Heights.  

I moved here partly for this reason, to experience these invisible lines and the cultures of these micro neighborhoods. I actually lived in my SFR in Old Brooklyn for a year fixing it up. Is it the ideal neighborhood for me to live in? Probably not but I've got to make some great friends and learned much of the culture and mentality of the locals in that area. Just sold/closed on the house on January 5th. I built a really cool fireplace and got the courage to pursue woodworking (now I want to tackle some cool furniture). The mosaic tile work and crown molding was quite a feat!