First multifamily rental property

[Ken Tsai]

Hello everyone,  I am planning to purchase my first rental property this year, and still debating between single family or multifamily.

As a first time investor, a lot of friend and family are recommending me to start with single-family first,  but if the price is almost the same,  would you guys choice single family or multifamily?  my goal is to build up my long term profile and have enough passive income to replace my job one day.   Also, 2 places I am looking at now are Cleveland, OH or Chicago, IL,  I was told that OH is more landlord friendly when it comes to eviction.    Does anyone have any recommendation?  I am based in Bay are so both place will be out of state for me and I will probably hire property management to run the place for me.   Thank you

[James Wise]

Originally posted by @Ken Tsai:

Hello everyone,  I am planning to purchase my first rental property this year, and still debating between single family or multifamily.

As a first time investor, a lot of friend and family are recommending me to start with single-family first,  but if the price is almost the same,  would you guys choice single family or multifamily?  my goal is to build up my long term profile and have enough passive income to replace my job one day.   Also, 2 places I am looking at now are Cleveland, OH or Chicago, IL,  I was told that OH is more landlord friendly when it comes to eviction.    Does anyone have any recommendation?  I am based in Bay are so both place will be out of state for me and I will probably hire property management to run the place for me.   Thank you

 I have seen a lot of discussion on the Cleveland market in this thread. I'm not interested in engaging in a discussion on whether you should or should not choose Cleveland as a place to invest in. However if you do want to invest in Cleveland you should educate yourself on the different types of neighborhoods we have here. There are some great rental neighborhoods and there are also some incredibly blighted areas. Prices will vary widely and you need to know why that is. As such I created The Ultimate Guide to Grading Cleveland Neighborhoods so out of state investors can get a firm grasp on the Cleveland market.

Knowing the pros and cons of each type of neighborhood is very important. Take a look at some photos below to see some of the things you should be prepared for if you engage in investing in these blighted areas. Note; these are all photos of properties in my company's rental portfolio. We have a portfolio of over 1,000 rentals in a wide range of neighborhoods in Cleveland.

Tenants got into a fight over a nominal sum of money. Burning one parties car was the way one of the parties involved decided to handle the situation.

Best part about the car fire was one of the parties forgot which car was owned by the tenant. They just knew it was gold. So they set all of the gold cars they saw in the parking lot on fire.

No caption necessary for this toilet from hell.

This is what a kitchen can look like when a low income tenant moves out of it.

This is what a backyard can look like when a low income tenant moves out of it.

If tenants in these tough neighborhoods don't have yards, don't worry they will light off their fourth of July fireworks in their bathrooms.

Don't worry though. Sometimes when they move out they forget about their unregistered firearms.

Another point i'd like to make is you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.