New Investor: How is the Cleveland Market?

Multi-Family and Apartment Investing
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New Investor: How is the Cleveland Market?

Emma S Endicott
Member since 2022 · 2 posts · 8 votes

Hey all!

I am BRAND NEW to real estate investing and super excited (nervous) to get started. I live in Salt Lake City where the housing market is ridiculously expensive and not really practical for me to get into. Looking to purchase my first multi family house by the end of the year. I've been doing propery analysis' on a lot of different cities and Cleveland seems to come up consistently with high cash flow and cap rates. I've noticed property taxes are super high, but including that high rate, a lot of properties still seem like a great buy. Am I missing something in this market that is a huge drawback? I'd guess repair/maintenance may be higher than average because of the age of a lot of the homes... anything else?

House example:

1825 Lakeview Rd, East Cleveland, OH 44112

$2500/mo cash flow

18% Cap rate

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Mohit Asthana
Investor · New York City · Member since 2016 · 45 posts · 22 votes
4y

I'm an OOS investor that invests in Cleveland - 37 doors right now. Everything is street by street so understand the neighborhood. I owned an 8 unit in a D area after thinking it was a C-... I was completely wrong about it. 

There are good and bad pockets. Cash flow is great. Taxes are high, but offset by the high rent to price ratio, even in this environment. 

Check out some of the suburbs - west side has nice suburbs as some of the "Heights". Watch out for Point of Sale if you're going to be investing in the Heights. 

you can do really well in Cleveland, but need the right team. Don't expect appreciation but cash flow is great. Set aside budget for some capex or do it all upfront. You're buying older buildings that may need some work. 

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  • Josh Edwards
    Developer · East Moriches, NY · Member since 2020 · 55 posts · 33 votes
    4y

    Hey Emma,

    Glad to see you're interested in pursuing multi-family! Are you interested in raising capital to do deals? Or are you planning to do deals with your own money? 

    Just because a market is cheaper than your own doesn't necessarily mean that's a good market to invest in. It's important to remember that real estate is more than just numbers! You have to actively manage these properties, or manage the property manager. The national average for multifamily cap rates is in the five percent range. 

    I don't know much about this property or the area, but if I saw something with an 18% cap rate, I'd be skeptical, and I'm not sure I'd like to invest there. There's a reason why Salt Lake City real estate is expensive. It's because investors believe in the fundamentals of the area! You just have to look at investing there from a different perspective. Instead of investing for cash flow, you can invets for appreciation. 

    If you don't believe in the fundamentals of Salt Lake City though, don't invest there. Hope this helps and I didn't confuse you, lol. If you have any other questions, feel free to reach out!

    0Reply
  • Nick Shri
    Rental Property Investor · VA · Member since 2020 · 218 posts · 133 votes
    4y

    @Emma S Endicott Familiarize yourself with this blog post - https://www.biggerpockets.com/...

    Understand the neighborhoods. You can make money in pretty much every neighborhood in Cleveland, all depending on what risk appetite you have from management point of view. I too own a duplex in Cleveland and so far it has worked out well. If you wish to chat about it feel free to dm me.

    Good luck..

    0Reply
  • Erin Dorsey RobinsonPro Member
    Real Estate Agent · Cleveland, OH · Member since 2020 · 280 posts · 365 votes
    4y

    Hi Emma!

    Congratulations on making the leap into real estate investing! It is exciting and there is a lot to learn. Cleveland is a great cash flow market. Most of my clients are people who live in more expensive markets who have come to similar conclusions about the opportunity to invest here. You're not missing anything but you do have to be prepared to do your diligence on each property you find. They are all different. Painting with broad strokes in any area can get you into trouble as the neighborhoods change from block to block and the maintenance standards are different from one seller to the next and so on. You only get those great returns if you have a great team in place to help you buy smart, manage well and get amazing tenants.  If you would like to discuss further, I'm always glad to help new investors get the lay of the land and share some contacts that might be helpful to you as you get started. Feel free to email me directly.

    All the best to you

    E

    [email protected]
    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    Best overall rental market the last 12 years or so. Forbes had it #1 2017, - 18, but they were not paying attention. We used to provide 25- 30% NET caps  ( NOT SOLITICING) with all in pricing of 30- 45k.  Now 10% nets are to be had as pricing has more than doubled tripled or more.  Its all about your team and knowledge. 

    All the best

    BTW, these returns are on cash purchases, even higher when refi 

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    BTW, you better NOT be doing this on your own. You 100% must have a team on the ground or you will get ripped off and have a terrible experience. Also East Cleveland for your 1st time, again you MUST get a team around you that is one of the worst areas in America. 

    God luck  

    0Reply
  • Shane Kelly
    Real Estate Agent · Cleveland, OH · Member since 2021 · 383 posts · 361 votes
    4y

    Cleveland is a really hard to beat cashflow market. With prices being some of the lowest for a big city in the country and having pretty solid rent prices too, you're going to find a lot cashflowing properties. Only big drawbacks other than the one you mentioned is that a lot of stuff doesn't appreciate much. Even our big swinging appreciation spots are going to seem tame compared to a market out West. Also to touch on your example property, this is in a pretty rough spot. East Cleveland is notoriously bad area of Cleveland. The only upside to 1825 Lakeview Rd is that it is close to being in a good area, so if for some reason that gentrification bled into East Cleveland (which while it could, it is highly unlikely) then this property could stand to be worth more. All in all, great spot to park money in for a good return. Let me know if you need anything here. Thanks!

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Quote from @Emma S Endicott:

    Hey all!

    I am BRAND NEW to real estate investing and super excited (nervous) to get started. I live in Salt Lake City where the housing market is ridiculously expensive and not really practical for me to get into. Looking to purchase my first multi family house by the end of the year. I've been doing propery analysis' on a lot of different cities and Cleveland seems to come up consistently with high cash flow and cap rates. I've noticed property taxes are super high, but including that high rate, a lot of properties still seem like a great buy. Am I missing something in this market that is a huge drawback? I'd guess repair/maintenance may be higher than average because of the age of a lot of the homes... anything else?

    House example:

    1825 Lakeview Rd, East Cleveland, OH 44112

    $2500/mo cash flow

    18% Cap rate


     You're prolly gonna wanna read The Ultimate Guide to Grading Cleveland Neighborhoods before doing anything crazy like buying an East Cleveland deal based on CAP alone.

    0Reply
  • Mohit Asthana
    Investor · New York City · Member since 2016 · 45 posts · 22 votes
    4y

    I'm an OOS investor that invests in Cleveland - 37 doors right now. Everything is street by street so understand the neighborhood. I owned an 8 unit in a D area after thinking it was a C-... I was completely wrong about it. 

    There are good and bad pockets. Cash flow is great. Taxes are high, but offset by the high rent to price ratio, even in this environment. 

    Check out some of the suburbs - west side has nice suburbs as some of the "Heights". Watch out for Point of Sale if you're going to be investing in the Heights. 

    you can do really well in Cleveland, but need the right team. Don't expect appreciation but cash flow is great. Set aside budget for some capex or do it all upfront. You're buying older buildings that may need some work. 

    2Reply
  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    @Emma S Endicott

    Cash flow = risk. Why are you getting an 18 cap? To take on a ton of risk. So just understand locations that you are investing in. What you really want is affordable GROWING markets that cashflow not the most cash flow possible. Looks like this is on the border of some growth but keep in mind that Cleveland cash flows well because the population in a lot of places is declining. 

    The growth map to give you an idea. 

    Podcast Guest on Show #373
    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    4y

    @Emma S Endicott like most markets, there are good and bad areas of Cleveland. Although an area might cash flow ok short term, you want to be in the better parts of the city that are more stable. In general, the better areas of Cleveland are West of highway 77. The further west you go, the better. I would be extremely skeptical of anyone saying that something has an 18% CAP rate. I've been doing this for over 10 years in some of the highest yielding markets and have never seen CAP rates that high. I don't really know this part of the city, but looks to be in a rougher part of town. Being a half block from a major power plant and across the street from a bail bondsman aren't big selling points for me. I think you need to do a lot more homework.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Quote from @Mike D'Arrigo:

    @Emma S Endicott like most markets, there are good and bad areas of Cleveland. Although an area might cash flow ok short term, you want to be in the better parts of the city that are more stable. In general, the better areas of Cleveland are West of highway 77. The further west you go, the better. I would be extremely skeptical of anyone saying that something has an 18% CAP rate. I've been doing this for over 10 years in some of the highest yielding markets and have never seen CAP rates that high. I don't really know this part of the city, but looks to be in a rougher part of town. Being a half block from a major power plant and across the street from a bail bondsman aren't big selling points for me. I think you need to do a lot more homework.

    bruhhhh

    1Reply
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