All Forum Posts by: Ryan Evans

A lot of eyes are on the midwest these days so I thought I’d put an offer out there for all the BP folks around the country who have their eye on Cleveland, Ohio.

I've personally placed a major bet on Cleveland as an upcoming city for long term buy-and-holds and I have plenty of reasons why. I've got a duplex running a 44% ROI and another ~24%'er on the way. It's a duplex closing on Sep 5. I live in the Seattle/Tacoma area so I'm doing the whole out of state thing.

Anyway, I see a lot of interest in Cleveland, Akron, Toledo, Columbus, Cincinnati, etc. (sorry for keyword spam!), here in the forums, but the Midwest can be a risky place to invest. Not everyone has the capacity to fly out to every city they want to invest in, but some questions can only be answered by being on the ground.

So, if that’s you, maybe I can help! I’m flying to Cleveland from Sep 5-10th to get keys, fix the new place up, look at some properties, grow the team, and generally get the place rent ready. The ugly details are where the real learning happens so if you want to know about the deal, agents, contractors, taxes, regulations, contracts, financials, etc., while I go through the process, I’m happy to share my experience. I’ll be sure to document the process and post it on BP. I’ll also be bringing my best friend out from Alaska. He’s never set foot in Ohio or even bought a property but is looking at investing in Cleveland. Maybe you can relate?

Anyway, the BP community has helped me a ton, so here’s my chance to build up some good karma. If you want to know what it’s like to be a new out of state investor buying a property in the midwest, I invite you along for the ride :)

A year ago I was totally new to investing, but I’m slowly getting it figured out. Leave a comment or send a PM if you have any questions on what it’s like to do a deal out in the Cleve. If you like what you see and might want to talk partnerships, I’m all ears. Also, if you don’t have any local contacts out there and there is something we can do to help while we’re in town, don’t be shy!

Nice breakdown @Kevin Wiley. I am a big proponent in the out of state investing for cash flow. I'd love to see numbers like that at scale, but a big consideration is the availability of those deals (That said, I obviously know your write-up is all best case scenario). I have a duplex in Ohio that's $35k all in after renovations. It cash flows over $800 with all the expenses, capex, etc., so I know it can be done. But I wasn't able to find another comparable deal that really got my attention for about 6 months. Sure, I wasn't looking at every neighborhood, because they vary so much, but the good deals are hard to find. Tomorrow, I'm paying $75k for another duplex on a loan that I expect about $500 in cash flow, but I feel much more comfortable with the property and neighborhood. The second deal is certainly more realistic overall, but even that was a rare find in my opinion. 

And keep in mind that percentages don't really work the same way on these cheap properties as they do for those that are $100k+. You're unlikely to find a property manager who will deal with the type of tenants in $500/unit properties, who generally cause the most headaches, for $40. Maybe at scale, but starting out you should expect more like $80-100+ per unit minimums. At least that's what I've seen out there. 

At the end of the day it can be a great strategy, so give it a go and see what adjustments you need to make after the first property. And feel free to message me if you want more info on the dramas those types of properties involve :)

I agree it's a very doable plan. Just make sure you get the right team in place. I've personally had a pretty tough time finding reliable contractors in Cleveland, but I know finding contractors in any market isn't easy. I've been out to the Cleve a few times this year already and it's a different world than what us west coast people are used to. I certainly recommend using some of that $750k you save on buying in CA on a weekend trip out to your target market to know what you're getting into. I'm in the process of buying my second property out there sight unseen, but only because I've spent a good chunk of time out there. If I had bought a property the first time without being on the ground, I would have lost a lot of money, and that I am certain of. 

Hey Aaron, I know someone who does rent ready rehab and PM for investors. It's a smaller operation, but they might be a good contact for ya. The owner mostly works on the east side of town, but maybe the they would be open to expanding down to Parma. PM for details.

8% management sounds a bit low, especially with rents under 1k. That's one of those things where a percentage of rent doesn't always work on inexpensive houses. Much like how a roof roughly costs the same whether a house rents for 700 or 4,000. Of course, assuming the same size, layout, etc. I seem to remember a couple PM's I spoke with out there were had 100-120/month minimums. 

As far as rental permits go, I think it's $70/year per door. Or maybe that's for both of my doors since I've got a duplex. 

If you want to get serious about investing you might need to make some sacrifices. @Account Closed is right in that you'll likely have an issue getting financing with your sources of income. A 600k property even on a 3.5% down is still going to be $3.5k+ monthly in PITI. A loan like that would have even been tough to pull off in 2006. Investing out of state is a scary thought for the first timer, but you'll force yourself to be a better investor if you can invest without having to be on site.

I live in WA where cash flow is scarce so I headed to the Midwest to invest and couldn't be happier!

@Michael Rodriguez I just came across that post again today as someone bumped it up. It's a great overview of what Cleveland is all about and thanks for putting it together! I'm thinking about doing a similar thread on my upcoming trip back out to Cleveland as an OOS investor about to close on my 2nd property out there. 

@Andy C. but in regards to the drivers behind the city, here's why I chose Cleveland in no particular order. 

-It's bottomed out. I believe the money is made when you buy, and Cleveland is cheap.

-It has a disproportionately large number of duplexes. Just the way things were built back in the day, I guess. (I like MFR)

-It's got some great stuff going for it - one of the best medical facilities in THE WORLD, two of the best sports teams in the country (Cavs and Indians), rock and roll hall of fame, several fortune 500 HQ's, a flourishing arts/culture/music scene, and the infrastructure of what was once one of the richest cities in the world. 

-I can see the overinflated cities around the states cooling off and younger people moving to trendy cities they can actually afford. Cleveland has a lot of culture compared to most of the rust belt cities. 

-And most importantly for me, you can cash flow like crazy out there if you find the right deal. 

Hey Heather, there are a few of the resources that have really helped me out since I got back in the area. The Residential Housing Authority has free monthly meetings in several counties. Here is a link  http://web.rhawa.org/event

Also, the Fixated on Real Estate Meetup is great. And I sometimes go to the courthouse in Tacoma on Friday mornings to do some networking with lenders, buyers, etc., at the tax foreclosure auction. You probably won't find much in the way of multi-family's, but it's a great way to get more involved in real estate as a whole. No sales pitches in any of these!

I know some great brokers down in Tacoma and I'll have my license in the next week or two as well. Let me know if I can be of some help :)

I've heard good and bad things about Key Bank, but their headquarters is in Cleveland so I'm sure they'd be very understanding of whatever you're trying to achieve. They should at least get the local market a bit better!

You've probably got more saved than 99% of 22 year-olds so you I'd say you might as well get started. Renting just means you've got more money to invest with. And if you find a good duplex or something you can house hack while you're still on the lease you can always find a way out of the lease. That might mean you're out a month or two of rent, or you might be able to sublease as well depending on the situation. 

Just don't burn all your savings on the first property so you've got some cushion for the unexpected things that will inevitably pop up :)