All Forum Posts by: Harrison Sharp

What’s actually going on in the Cleveland Real Estate market?

The investment market in Cleveland is still very strong and I forecast it will stay that way. The reason: we have a lot of investors coming from out-of-state or out of the country where their local markets are completely unaffordable and generate little to no cash flow. This isn’t something new, but will escalate even more given the state of other “hot” rental markets that simply don’t make any sense to invest in right now (Austin, Dallas, California, New York, etc.).

In Cleveland, although the price of properties is higher than in recent years, you’re still able to achieve a strong return on your investment, and real estate investors know that.

Interest Rates - why they don’t matter.

Even with interest rates going up, real estate investors will simply adjust their offers on properties accordingly. At the end of the day, it’s a simple math equation to come up with the returns they need on their investment. Sellers will have to adjust their unrealistic selling prices of 2020-2022 to match the rising interest rates. And in reality, the “leveled-out” selling prices of properties will be in line with what the market calls for, whereas in recent years, investors were able to purchase them at that higher price because interest rates were so low.

It’s really a “give-and-take” correction happening: sellers will have to bring down the over-inflated prices of properties and buyers will be offering at a number that makes sense given the interest rates. The savvy investor also recognizes that rates will eventually come back down and when they do, they will be able to refinance into a lower interest rate loan - so it’s really in their favor to buy as many properties as possible while they are being sold for less, even at a higher interest rate.

Going off of that, the responsibility of pricing in the current market falls on the experienced investor-focused real estate agent to set realistic expectations and pricing guidance to their sellers. The two must work hand-in-hand to price accordingly.

All-in-all, the Cleveland market is neither a buyer’s or seller's market, it is for the foreseeable future, an investor’s market.

Quote from @Peter Fife:

Quote from @Chris Seveney:

OK. So let me understand this:

1. You take $10k out of a LOC and invest it and get 19% interest ($300/mo for 4 years). Not sure where you are getting 19% interest. 10% interest is $253/mo which I would think be more in line. .....

SO AT THAT STAGE: 

You are $8,000 out of pocket - Correct?

....

What am I missing? Getting P&I payments (and paying ordinary income on it), will NEVER yield a better return than interest only. 

Sidenote: I am a note investor and play in this space as my full time job, so I am not some crackhead. 

Chris thanks for the great questions, and I hope I didn't give the impression I thought you where a 'crack-head' as you stated. I'm a newbie at this, not my full time job, just trying to do something better than doing nothing ;)

 Yes you're correct for this ONE investment, but I believe the point isn't doing it only once, it's the layering over time. This isn't a get rich quick thing... it takes time to build this up. AND it's recommended to layer in longer term monthly type of payments, like rentals. So over time you start putting in less, while getting more out of it. 

To your point around T-bills, I'm not close to an expert around any of this, but that vehicle ties up the investment until maturity correct? The purpose of this type of method is to gain an income stream on a monthly basis, which t-bills don't do. Yes you can latter them on a monthly basis. 

No I did not think you thought I was a crackhead :). 

For me, I know nothing of this company, nor commenting on them specifically, but just commenting on the numbers that are thrown out there and trying to evaluate if this is something to consider. But when I look at the numbers, arbitraging your HELOC is common. You borrower at a lower rate to invest in something higher. Its no different than should I pay cash for my car that I can finance at 4% or invest it at 8%. Well of course you should invest the money vs. paying cash. Having some debt is not a bad thing (unless you are Dave Ramsey follower).

When I look at what is tossed around in this forum, it does not seem worth it because you get such low principal back every month that you cannot reinvest, and even if you could its time consuming. I used T-bills as an example as something that is pretty much guaranteed and low interest.

I could take $8,000 of my money (or $2k per month) - not touch my HELOC and invest it in something for the same period of time and get 2-3x the interest is what I am alluding too and I am curious if people that do these types of programs evaluate the numbers comparing them to other investments or just are sold on Cash on Cash, which on a loan is the WORST way to evaluate your returns. 

Any suggestion for an investor friendly Attorney & CPA in the Dallas area would be greatly appreciated.