Are Midwest locations drying up?

Question

I'm not a new real estate investor, nor am I a seasoned one, probably more middle of the road, and here's my story.  I bought a duplex in Euclid, OH, northwest of Cleveland, back in June 2017, for $78000.  My realtor thought this was a bargain at the time.  Little did I know it was.  Both sides are rented out and I'm just paying off the mortgage instead of taking the money.  Two years later, it's hard to find a bargain like the one I have.  As I was doing my research to find another property to purchase, I found out that a new Amazon Fulfillment Center is minutes away from my place and there's another one several miles from that one.  Taxes are up based on my new escrow statement as well as the property value of my place.  This is both good and bad.  I had plans to expand to Buffalo back in 2017 but now it's hard to find some bargains there as well.  It seems investors found out about Cleveland and Buffalo the last couple of years and big money is moving into those areas.  Right now, I'm looking to expand into Pittsburgh and found some decent places, one in which I'm going to put out an offer.  It was unexpected but PA seems better tax-wise than NY.  Does anyone know of any other locations to choose from?

Robert Matelski · Answer

Hey Tim... You can totally fight your property tax valuation, and often win. Especially if you bought it just in 2017. The deadline is already passed for this year (it is typically Mar. 31st) but you can do it next year (from Jan. 1st to Mar. 31st). It is not too hard to do, as you can file it online. I have had about a 60% success rate getting my valuations lowered in Cuyahoga County. Mark your calendar for Jan. of next year and give it a shot if you want to potentially save some $$$ on property taxes!

Jad Boudiab · Answer

Going off of what @James Wise mentioned, no way of landing a Euclid double today for $78k on the market. You'll find this off-market, wholesalers, direct to seller, but not on the market.

$78k on market may be do-able in Cleveland proper neighborhoods like Old Brooklyn. Solid duplex, plenty of rental demand.

- Is the market drying up? No.

- Is the MLS dry? Maybe, it's a bit more tight than a few years ago. But that's everywhere.

Buy at wholesale prices, there's plenty of deals out there, just connect with more people and let them know you're buying. It's like a sales job, numbers game.

Brian Ploszay · Answer

The better areas have dried up.  But there are plenty of rust belt cities and declining neighborhoods in the urban midwest.  This real estate should be avoided unless you are experienced and local.

Both Cleveland and Buffalo have had populations that significantly decreased since 1970.  So lots of surplus, under-utilized and slow appreciating housing.  That being said, Cleveland has some up and coming urban neighborhoods.  So just be selective.  Detroit, of all places, is making a big comeback in a small portion of the city, near downtown.

Since you are already in Cleveland, I'd stick to that region, because it will create some efficiencies to be in one location.  You'll get to know it better, you'll have more connections, etc...

Shawn Ackerman · Answer

@Tim Rostro Solid! Seems like you have your ducks in a row.  All the  best to you man.

Shawn Ackerman · Answer

@Tim Rostro what is appealing to you about the property in PA?  Have you looked at Milwaukee WI?

Tim Rostro · Answer

Everyone, thank you for the info.  Here are more of my thoughts.

@Brian Ploszay  After buying the first property 2 years ago, I thought this could be a good start in the Midwest.  I'll wait and see how this goes and at the same time, raise more capital (save for us working types) to buy the next purchase.  Well, now that I have the capital for decent down payment, prices for multi-families have shot up.  I actually went further east of Euclid and found several in the Willoughby/Lake County area.  After discussing with my realtor (the one who helped me withe previous purchase), her partner told her that he lived near that area, and tenancy is high there.  I'll keep looking then.

@Elise Bickel I did some research on the Pittsburgh area real estate market and found it was slow going but starting to heat up the last year or two.  These Midwest cities like Cleveland, Buffalo, and Pittsburgh aren't as sexy as the coast cities as San Francisco, Seattle, or LA.  They also are recipients of the tech sector as some companies have relocated or have branch offices there revitalizing old neighborhoods which then spread out like a domino effect.  It's just trying to get ahead of the "Big Money" and find deals before prices skyrocket.

Elise Bickel Tauber · Answer

Pittsburgh has been a really good location for investors. I'm seeing that there is a little something for everyone here. Whether you are looking higher end properties or lower end; brrrs, etc . Its all here. I also like that you see a nice ripple effect here. For example, Lawrenceville is a really popular area, and ask inventory dries up and rents increase pretty substantially, you see neighboring areas like Millvale and Sharpsburg start to increase. It helps predict future competitive markets.

James Wise · Answer

Oh man duplex in Euclid for $78k...Yea that's a no go today. You're looking at, at least $100k for that nowadays.

Deborah Burian · Answer

@Kiera Underwood - what's your metric for rate of return?

Kiera Underwood · Answer

@Tim Rostro with off-market deals, rents average 1% rent to value ratio in B & C. A class they dip a bit below.

Are Midwest locations drying up?

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