All Forum Posts by: James Maradits

Sahil,

Welcome to BP.  Your target areas and rent figures look completely realistic and easily attainable.  

Welcome, Jake.

Congrats on paying off your student loans, that takes a lot of hard work and commitment to pay down that level of debt in a short time.

Not all areas of Cleveland work well for AirBnb but there are certainly some very desirable areas to do so in.  It's great that you have family in the area, so I'm assuming you've spent some time here yourself?

I'd recommend contacting @Aaron Westerburg

His team has done a number of multi family inspections for clients of mine in the Cleveland market.  Fair pricing and great service.

Lakewood would be an ideal market to house hack a multi unit.  There is a high demand so rents are high and vacancies are easy to fill.  If I were in your position, I would definitely look to use a low down payment owner occupant loan to get at least 2 units, 3-4 if the right property can be had.  More units for less money, plus then you don't have to have roommates to house hack.  I have worked with lenders who are able to use the rental income from the other units in the property to help you qualify for the loan as well, which could be a big help if you're fresh out of college with a shorter job/credit history.

I think the hype of the Amazon fulfillment center was made up by agents looking to sling more deals in the Euclid area.  Hardly anyone talks about the fulfillment center they already opened in Warrensville Hts.  Bringing 2,000 (relatively low wage) jobs to the area is great, but given that the Cleveland metropolitan area has over 2 million people and the fulfillment center is directly off of the interstate, I don't see people making a great migration to live in Euclid when you can commute anywhere in Cleveland in about 20-30 minutes.  The tax rate in Euclid is actually higher (3.11% vs 2.79% of Cleveland), but the cost of entry *can* be lower depending on the area.

Do you plan to owner occupy (house hack?) or will this be a strict rental?

What I dislike about Euclid and Cleveland Heights are the higher tax rates, point of sale, and rental licensing requirements that can be harder to navigate than some of the other areas.

Lakewood is one of my preferred markets, but finding a single family home that makes sense as an investment will be next to impossible.  Have you considered 2-4 units?

Parma and Brooklyn may be good areas to look into as well.

These numbers are very easily attainable in most midwest cities.  If you decide to go outside of your local area, definitely spend time vetting potential brokers, property managers, etc.

Best of luck!

If you've got credit, good debt/income ratio, and a down payment financing a rental shouldn't be a problem through most banks.  Local banks will be more likely to lender on lower value properties (not sure if this is what you are asking exactly) than a larger bank will be.

The ideal scenario is to have your housing expense be zero or significantly less than if you were renting in the area AND make sure that if you were to move out of the property in the future that it would then cashflow.  If you can get cashflow while you're there obviously that would be great, but in the New York/Newark market that will probably be hard to pull off so I would consider having the payment offset by the tenants enough to where you're paying no/low monthly a success.

Hey Monica,

Congrats on the first deal under your belt.

It sounds like the numbers on the deal are nice and realistic, which isn't always the case with turnkey companies (IE the ones that sell a 60k house for 90k to the naive investor).  While I generally do believe there is opportunity for the savvy investor to out perform most turnkey companies, I think that particular deal would be hard to beat or even repeat a small deal like that from afar in this current market.  Deals in the eastern suburbs (Garfield, Maple, Cleveland Heights, Euclid, South Euclid, Shaker, etc) can be very tricky to navigate with city regulations, point of sale inspections, rental licensing, etc.  In some of the cities you will be required to put large sums of cash into escrow with the city for point of sale repairs before they will allow title to transfer.

Say for instance you were able to find this exact deal on your own for 40k vs 61k, but you had to manage and/or hire someone to manage the process.  Repairs will likely be 10k+ if nothing goes wrong (hint something always goes wrong), there will be fees due to the city for inspections/POS/etc, fees for project manager/property manager to be present to meet with city inspector/utility companies/etc, project may very well go over your anticipated timeline and now you've got extra months of vacancy and carrying costs, you have to pay the property manager the first months rent to lease the place, etc etc.  At the end of the day you spent a lot more time and effort and MAYBE came out a little bit lower than 61k, but most likely went over budget.

By no means am I saying this is impossible, but on these smaller deals things can go wrong quickly.  If you're going to do it, you're going to have to be serious and be confident in your team.  Keep in mind it's going to be harder to find high quality contractors, etc to work on a deal where they are going to make a few hundred or thousand dollars when they can go work for someone else on higher end projects to make more money.  Also keep in mind $10k over budget on a $40k deal could be detrimental while $10k over on a $150k deal will be a lot easier to bounce back from.

Best of luck to you moving forward.  Please feel free to shoot me a DM if you have any further questions I may be able to help with.