Regarding your operations, this is my observation
- You do a terrific and consistent job with your rehab. I have seen the scope of your work and estimates in some of the docs for your crowd-funding offerings in realtyshares. I invested in those and got back good returns. When I look at the rates quoted by an of the PMs including those from HWG they would probably charge me 3X what you can manage with your budget. Getting a trusted GC by yourself that you can manage from out of state is daunting in Cleveland. I have not found any from poking around yet nor been getting any proper referrals.
- I am an accredited investor and you have a dual role (Investors relation mgr at crowd sourcing firm Brelion). A lot of the offering pipeline on Brelion is from Smartland these days. You are very successful at your business model- buy low in not the best areas, do a great rehab in a discount budget and offer professional PM for your buyers. Over long term you are pivotal to improving quality of the homes and neighborhoods than the stingy landlord that most people are. You have solved the funding issue- able to continue to fund more of the crowdfunding deals as you have a ready supply of buyers who are happy with your turnkey product.
So now to the real questions I have assuming above is at least half true.
1. If I am a accredited investor, isn't it less risky for me to be part of your very successful turnkey sales process by investing in your crowd findings efforts and get a safer 13%+ returns than buy a turnkey home in more risky East side and get similar returns with more risk and headaches of tenants, PM etc.
2. Its rare to find a professional realtor brokerage like what Holton Wise offers. West side has more long term potential than East Side. TBH , Cleveland is a risky market- one of the cities that has declined over time. If there is a revival with a switch to service sector, people will want to stay in better neighborhoods, no crime and avg schools. So as opposed to a buying turnkey on East wide isnt it a better risk return balance sticking to West side?
3. MLS offers the transparency to market that turnkey doesn't. What if many of the improved comps on the East side are due to investors buying turnkey at good prices rather than a real local market creating the price point? I am not making a statement that this is true, this is one of the known unknowns that has caused me to avoid turnkey for the time being though I feel that you are seeking a fair price for the quality of rehab, rent returns and reliable PM ops. Everyone has to make money at the end of day.
So for my own selfish long term goal, any advice on how I can manage a subset of what you achieve being out of state and sticking to West side but now interested in finding below retail homes that I want to rehab to get extra equity at purchase. I need a good GC as a first step.
Originally posted by
@Steven Gesis:
Originally posted by @Chheang Yang:
Originally posted by @Steven Gesis:
Originally posted by @Chheang Yang:
@Sunny D., one thing to take a look at are the property taxes. I recall OH is one for huge property taxes for investors. There are a handful of states that have property taxes where you'd spend 3-5months of annual rent just to pay taxes.
Chheang I would encourage you to look at CLE, the taxes are not nearly as aggressive as you have noted. Many neighborhoods around NE Ohio that offer a very favorable tax rate, that is easy to bear and offers a good balance of risk and cash flow.
Thanks for the note @Steven Gesis. Any neighborhoods you'd suggest? I see Pharma, Euclid and a few others that people are flocking to. During my eval of a few of the homes that the turnkey companies were advertising, I looked up tax info and it was pretty steep. I recall like 3k to 5k for a 60k home that'd rent for 900/month. Are there areas that you'd suggest? I appreciate the advice and help. Thanks!
Chheang, I know I am going to start a storm here:
I think its not only about neighborhood, you have to consider the sub markets within the neighborhoods, it certainly helps to better understand your plan. Are you seeking to be somewhat hands-on or simply a remote investor looking for good consistent cashflow?
Once you truly answer that question, I think you can better define area and sourcing. If you want something hands-off I always encourage a consideration to Turnkey, many argue you are paying a premium, no premium is a real turnkey, this is a market driven price if you are financing, the value will be provided through the appraisal, so it will be evident quickly whether the home is being sold at a premium or not. The reason I present this situation, is that you want a full accountability, especially if you are out of town, so simply buying something off the open market off the MLS, with a Property Manager partner, you are missing the most critical component, the physical construction support and maintenance support, that is not real true turnkey. Most Turnkey is off market, no premium, real Turnkey is not a process it is a cash flowing property with an existing tenant, no placement fees no realtor fees on acquisition, this is real turnkey. Now that is out of the way, we can talk about the neighborhoods.
I am not a West Side of Town guru, I am however an East Side of Town guru :) What I know about the West Side is if you want to play in the similar neighborhoods, you will not get the same value and rent rate as you will on the East side, based on my experience. West side is nice, East side is pretty amazing though, a lot of generational wealth, major shopping hubs, all major hospital systems are on the East side (Cleveland Clinic, University Hospital) - all major Universities are on the East Side of town, as well as the greater majority of the fortune 500 companies. Cannot get the same values/rental investor ratios in good quality neighborhoods on the West side as you can on the East Side of town.
I do not play in the lower spectrum of neighborhoods or home prices such as $40-70K with under $1,000.00 rent, just not my cup of tea, I have several homes in my portfolio remaining from that novice/beginner time point in my investment life, but as I have evolved, so have my properties, in category and quality. The biggest lesson learned to date has been the standardization of the construction materials, quality and methodology. To layer that a little deeper, its all about resilient materials, most important NO CARPET!!!!
Always remember, everyone has a different strategy, it just depends what your strategy is, and what fits your risk profile.
