Multifamily // Cash Flow & Appreciating Markets

[Joy McQueary]

First time investor here! I am in the research process for a multi-family unit. My primary goal is cashflow so looking for an asset that works and is also in a growing area.

What are your tips on finding and evaluating areas to purchase? What are the current markets you recommend and why?

[Jaycee Greene]

Hi @Joy McQueary! What type of properties are you looking to add to your portfolio? SF, 2-4 MF, or 5+ MF? And what is your price point and are you looking for turn-key properties or something along the lines of a "fixer upper"?

[Joy McQueary]

Quote from @Jaycee Greene:

Hi @Joy McQueary! What type of properties are you looking to add to your portfolio? SF, 2-4 MF, or 5+ MF? And what is your price point and are you looking for turn-key properties or something along the lines of a "fixer upper"?

 Hi Jaycee! Multi-family (1-4 units). Turnkey on a long-term. And $200,000-$1M. I want to know what markets are appreciating and showing good rental numbers

[Pete Krusinski]

Welcome to real estate investing! It looks like you're taking the right steps by identifying a promising market. As someone born and raised in Cleveland, I've witnessed the tremendous growth in Northeast Ohio firsthand. Given your criteria, Cleveland presents an excellent opportunity. You can find fantastic properties that fit various investment strategies, whether it’s securing a multifamily property that offers attractive cash flow or opting for areas with significant appreciation potential. In neighborhoods on the West like Old Brooklyn, Clark Fulton, and West Boulevard, I have seen properties yielding 10% and higher cash-on-cash returns. On the east side, places like University Heights, South Euclid, and Shaker Heights are B-class areas where I recently facilitated a deal yielding a 9% return and that property will see solid appreciation. While I could elaborate on numerous other areas, these highlights should give you a good starting point for your investment journey in Cleveland. If you have any questions feel free to reach out!

[Joy McQueary]

Quote from @Pete Krusinski:

Welcome to real estate investing! It looks like you're taking the right steps by identifying a promising market. As someone born and raised in Cleveland, I've witnessed the tremendous growth in Northeast Ohio firsthand. Given your criteria, Cleveland presents an excellent opportunity. You can find fantastic properties that fit various investment strategies, whether it’s securing a multifamily property that offers attractive cash flow or opting for areas with significant appreciation potential. In neighborhoods on the West like Old Brooklyn, Clark Fulton, and West Boulevard, I have seen properties yielding 10% and higher cash-on-cash returns. On the east side, places like University Heights, South Euclid, and Shaker Heights are B-class areas where I recently facilitated a deal yielding a 9% return and that property will see solid appreciation. While I could elaborate on numerous other areas, these highlights should give you a good starting point for your investment journey in Cleveland. If you have any questions feel free to reach out!

This is super helpful! I'm going to look more into Cleveland. Do you have an idea of average price points/rents (lets say for a 1/1)? 

[Pete Krusinski]

It defiantly depends on what area you're looking into. If you're looking for a Single Family (1/1) in a B class area $125k-$145K. Rent $1,200-$1,400. Multifamily B class area 2x 2/1. $220K-$240K $2,000-$2,400 gross rent. Thats what I've seen in some of the recent deals I've done and recent properties that have sold

[Jimmy Lieu]

Quote from @Joy McQueary:

First time investor here! I am in the research process for a multi-family unit. My primary goal is cashflow so looking for an asset that works and is also in a growing area.

What are your tips on finding and evaluating areas to purchase? What are the current markets you recommend and why?

Hi Joy! You may want to check the Columbus OH market. We're still seeing positive cash flowing deals here and lots of potential for appreciation. Overall great macroeconomics great for investment - there's the booming tech scene, rapid growth in population and the job market, strong rental demand, and landlord-friendly laws. I'm an investor here myself and own a successful rental portfolio. Happy to send over some resources on why Columbus is a great real estate market to invest in!

[Sam McCormack]

Quote from @Joy McQueary:

First time investor here! I am in the research process for a multi-family unit. My primary goal is cashflow so looking for an asset that works and is also in a growing area.

What are your tips on finding and evaluating areas to purchase? What are the current markets you recommend and why?

 There are tons to choose from! First off, your own backyard. 1, you know it best and 2 you can manage the property yourself, and learn about property management. But if you are not in market to do that, I would recommend Ohio. Check out population growth charts, jobs, etc in these areas. 

And as well as that, ask around like you are now! There will be a lot of agents advertising their market, and while this can be annoying, it can also be helpful when searching for areas to look in. 

I am in the Cincinnati, OH and Northern Ky market. If you have any questions about going forward looking for a market, or have questions about my own, let me know how I can help you best

[Samuel Diouf]

I would first decide on whether you want appreciation, cashflow, or a mix of both. If you want cashflow.. look for markets with low entry prices and higher rent averages. If you want appreciation, identify markets with expanding industries, positive growth trends, and bright economic forecasts.

Columbus, Ohio is a great market to consider if you're looking for appreciation markets that still cash flow. I moved here from Florida after seeing the expansive growth in the Columbus market.

There are multiple billion dollar companies dumping money into the city, such as Intel, Google, Honda, and Amazon. This is causing a huge influx of people moving here for jobs. And a lot of start-up companies are migrating to this city as well because of the OSU campus that has thousands of talented students graduating and looking for positions locally.

[Anthony L Amos Jr]

Quote from @Joy McQueary:

First time investor here! I am in the research process for a multi-family unit. My primary goal is cashflow so looking for an asset that works and is also in a growing area.

What are your tips on finding and evaluating areas to purchase? What are the current markets you recommend and why?

 Start where you are most comfortable. There maybe a good cashflow market in your area. You can connect with the local chamber of commerce and/or planning and development departments to find what is coming to the area that would create some appreciation. Bigger pockets also have webinars on how to choose a market to invest. Narrow down your location based off of your comfortability, budget, local property owner regulations, and rent to price ratio, and you'll be building a portfolio in no time. 

I have done fix and flips in Columbus where appreciation is strong, and I own a duplex in Toledo, OH where the price to rent ratio favors housing providers. 

[Joy McQueary]

Quote from @Samuel Diouf:

I would first decide on whether you want appreciation, cashflow, or a mix of both. If you want cashflow.. look for markets with low entry prices and higher rent averages. If you want appreciation, identify markets with expanding industries, positive growth trends, and bright economic forecasts.

Columbus, Ohio is a great market to consider if you're looking for appreciation markets that still cash flow. I moved here from Florida after seeing the expansive growth in the Columbus market.

There are multiple billion dollar companies dumping money into the city, such as Intel, Google, Honda, and Amazon. This is causing a huge influx of people moving here for jobs. And a lot of start-up companies are migrating to this city as well because of the OSU campus that has thousands of talented students graduating and looking for positions locally.

 This is really helpful. Thank you! What markets would you say have low entry prices and higher rent averages

[Samuel Diouf]

Cleveland is a solid option. The city currently has one of the lowest price/rent ratios in the Nation, with the average home price being $107k and the average rent being $1,416/Mo.

[Drew Sygit]

@Joy McQueary

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

PM us if you’d like to discuss this logical approach in greater detail!

[Regina Blake]

Hi, welcome Ohio is a great place to invest in real estate my clients are from all over the world. Please feel free to reach out with questions. Thanks!