All Forum Posts by: Christian Carson

All,

I've been through the process of buying rental properties in the past but now I'm looking for a duplex to owner-occupy. I found one in the middle of my top neighborhood, but it went under contract the day I went to look at it. I submitted an offer for $10k under ask anyway to the seller's agent.

I got a message from the agent today, almost a month later, telling me that "we are having an appraisal issue that is minor but the buyer is being difficult." He requested that I submit a backup offer to demonstrate that I am serious.

I've got a fully underwritten approval from Quicken Loans as of this week (it's a new product). I've been told that this is as good as a cash offer as long as the appraisal comes through.

I'd love to go somewhere else but now that this house is off-market, inventory in this neighborhood is exactly -zero-. I'd like to get ahold of this one if possible.

I imagine this seller wants to use my offer as leverage to get his buyer to close without issues. Is there anything I can do strategically here to get the seller to dump that guy and go with me?

Property management will probably be more expensive on a two-unit. I've seen flat rates of $79/mo/unit.

And again, you're probably not going to be able to purchase a turnkey at $45,000. To get in for that price, you'll probably have to purchase a wreck at $10,000 and put $35,000 into it. These kinds of deals are available even in good neighborhoods.

@Michael Wentzel , I'm a bit confused as to what you're looking for. In Cleveland, your typical duplex will yield nearly a 22% cap rate if you bought it for $40k, assuming your gross rents are $600/unit. 13% cap lands you at around $60k, which you can find in certain decent areas.

If you're buying at 10% cap or more in a decent area near your home in Colorado, I wouldn't count on doing too much better in Cleveland. That's a pretty good return. I invest targeting a 10% cap in good areas, and 15% in questionable ones. Deals are fairly easy to find but most of them involve substantial rehab.

@Michael Wentzel Thanks! There's still much to learn, as this market is surprisingly diverse.

@Jorge Garcia Let me know about these Tremont and OC deals if you see them. I've been trying to buy a multifamily to owner occupy in that direction but I can't find anything that doesn't seem way too expensive. Right now I'm about to "settle" for Lakewood in a great location about 1000 ft from the shore, but still think I'm paying way too much to live in a good area!

Your main challenge here is finding tenants that won't destroy the place and cause maintenance to go through the roof. Because there is a city loan on the property, chances are good that it's deed-restricted to low-income tenants. The attitude "just use a property manager!" doesn't work too well in the Cleveland market due to the horrendous state of the industry players here. If you're forced to place Section 8 tenants, your property manager is far more likely to choose the first tenant with a valid voucher and probably won't even qualify them otherwise.

Here's what I would do, in order of importance:

1. Get another quote on the roof, as it sounds high to me at first blush. Pick the lowest quote by a reputable contractor and do this first.

2. Look into getting new storm windows as it'll save you a ton of money. If not, then look into vinyls from ABC Supply. Your cost should be less than $200/window in materials plus a few hours' labor per window.

3. Quote out vinyl siding over the clapboards and compare it with a painting quote. You'll expect to repaint every 5-10 years. So it if doesn't cost more than twice as much, I'd go vinyl.

4. Leave those furnaces alone until they break, but get a quote from your HVAC guy now. Sometimes those guys can give you good insight about what you have--for example, if your furnaces are Moncriefs, they'll last you a hundred years.

Jorge, it's good to hear from another hands-on investor in the area. I'm a lifelong east-sider, and as anyone who has spent any appreciable amount of time in this city can figure out, you never cross the Cuyahoga River! My west-side knowledge is fairly handicapped. I agree with what you said about the east side of the city proper being a dicey place to invest (if you want to know the historical reasons why people have this attitude, do a little reading about the Hough riots in 1966). It's hit or miss, but I do love North Collinwood as a stable and safe neighborhood. I focus on the eastern suburbs mostly and I steer newbies toward them because of their plentiful supply of good tenants and job centers.

A word about the income tax--almost everywhere in Cuyahoga County has a 1%-2% tax. You're first taxed by the city where you work, and then the city where you live, and there are credits that partially prevent double taxation. This means that if you move to an area with no income tax, but you work anywhere in Cuyahoga, you'll still pay the income tax. There are some places where you really get screwed (like where I live in Cleveland Heights, as they only give a 0.50% credit) but most places credit you back the tax you pay if you work elsewhere (like the City of Cleveland).

Eric,

If I'm not mistaken, that was one of the purposes of the video. They've made a couple of other great promotions for tourism as well, and as far as I can tell from the people I meet around town, it's working.

Question: if I provide the tax returns to the lender myself, are they still going to file a 4506?

Downtown Cleveland Alliance, a nonprofit whose goal is beautifying and bicycle-patrolling the downtown CBD, put together a new promotional video about living and working downtown. I think they did a pretty good job, and I'd like to share it with you all.

http://www.youtube.com/watch?v=Ii0pP0tuP0g