Regional Tenant Culture and Mindset from California to Cleveland

[Andrew A.]

So it's been over a year here in Cleveland since I booked my one way flight from San Diego California.  I decided to come to Cleveland with my savings without a job but with a goal to earn passive income through real estate investment.  Nice safe transition right? I wanted to experience the Cleveland investor life first hand and have a few observations that I'd like to share/discuss.  

I also wanted to get a face check from BP members of my observations as a landlord because I don't think people really talk about Regional Tenant Culture.  I've been a renter for most of my adult life and this was the first time I wore the other hat as a landlord witnessing the tenants from a landlord perspective.  

My first experience as a landlord in Cleveland made me ask myself.:

WAS I LIKE THIS AS A TENANT?

I probably was worse than I'd like to think but probably not as bad as the renters I've experienced here in Cleveland.  I think it has to do with the Tenant Culture that is specific to this region.  I think there's more to it than just "class A, B, C" neighborhoods...it has to do with the acceptable culture of how a tenants treat their living space.

WHY?

Being Grateful due to Scarcity

I lived in dense cities all my life where competition for living spaces are high (Sao Paulo, San Francisco, LA, Seoul etc):  To be able to land a place for rent itself is a feat and if we do, WE ARE GRATEFUL.  With a grateful mindset, I think we value and treat our space with more respect.  Show it off, maintain it, <3 it, rinse, repeat.  Look at all those youtube videos of people showing off their tiny studio space in New York that they pay $2000 a month for.  I noticed that in Cleveland, vacancies are a dime-a-dozen and this abundance at a low price I feel affects how Tenants view and treat their apartments.  It loses perceived value.  This affects Regional Tenant Culture.

People that Would Rent Instead of Buying a 40k House

Expensive cities, we are forced to rent.  It's way too competitive and expensive.  However in Cleveland, one must ask who are the folks that are choosing to rent instead of buy and among those individuals the type of culture they embody in treating their living space.

Drug and Substance Abuse

This is a big issue globally, but it gets real here in Cleveland.  There has never been a conversation about a property being a "meth lab" or smelling alcohol during a showing since I started investing in Cleveland.  Keep in mind this happened while I was at a showing in Parma, a suburb of Cleveland.  The neighbor literally had a sign on the window pointing to the showing house "Was a meth lab".  If a tenant can't take care of themselves, they really can't take care of anything else, including your property. 

FINAL THOUGHTS

Cleveland is a popular market for out of state investors who are starting to invest due to the price point. I still think Cleveland is a great market to invest for buy and hold.  HOWEVER, a landlord in Cleveland must understand the regional tenant culture and take extra care and diligence in screening the tenants.  Also extra precaution is needed when deciding what properties you buy, down to the block, to attract good tenant culture.  

In the end, I'd much rather keep my apartment vacant than have it occupied by tenants with a culture and mentality towards their living space that doesn't align with my standards.  

[Ryan Arth]

@Andrew A. I get what you are saying. If you think about it though, you are comparing different levels of assets, let alone different markets. I don't think you were looking at 40K houses in CA (or the equivalent thereof). Here, that is a low end house. The folks that it attracts may be those with no other options. 

In my experience (there are certainly exceptions), as you move up the price/rent curve so does the quality of applicants that you attract. If your property is the best appointed at a given price point, you will attract the best applicants at that price point. If that isn't to your liking, move up the price curve. 

Yes, that will reduce annual yield. But where is the proper balance for you and what will best accomplish your goals over twenty years.