Cleveland, OH rentals - Worth it?

Question

I've been looking at investing in Cleveland, Oh. Looking at multi-family properties. I'm from Texas so I don't have experience in that location. Property prices are very reasonable and the rents more than cover the mortgage. Question is, is it worth it? How is the rental market there? Is it a hit or miss with tenants? I would like to go out there but if anyone can give me a little insight it would be greatly appreciated.

Cory S. · Answer

Fellow Texan here and I have a rental in the Cleveland market since 2016 and in my experience the turnover has been a killer, as I have never had a tenant stay more than 12 months.

Also the city regulations and they love to send in inspectors to find violations in your property that you will need to fix. The city also charges landlords annual fees just having a property and occupancy of a tenant.

Insurance and city services continue to rise in cost as well.

Placing my property on the market within the month as I’m out.

Stay in the South! My Georgia and Alabama properties don’t have these headaches.

James Wise · Answer

Welcome to the forums Cyndy. First of all, I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. If you are worried about Cleveland itself being the wrong market for you there are tons of other turnkey markets out there besides Cleveland. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, 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.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• 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.

Bob Prisco · Answer

@Cyndy Lester best overall rental market in the country for the  last 8 years or so.  I am not just making a statement, its fact. There are still 10% +++ net caps to be had . Its all about knowledge and your team

Good Luck

Federico Gutierrez · Answer

There is money to be made in every market, it all depends on the asset you buy thou.May investors look at MF while some have good luck and returns other experience higher turn overs because managing two families in a single property is difficult. Plus we aren't here to be adult baby sitters.I've always pointed my clients towards SFR as turn overs decrease massively. Average tenant stays 2yrs plus in my properties. They take care of all expenses. I just worry about TAXES and INSURANCE.

Don Petrasek · Answer

@Cyndy Lester an 8%-10% return on a single family in a solid neighborhood that has seen appreciation in the last 12-24 months is possible in the city of Cleveland.  I have 4 of my own, tenants typically stay at least 2-3 years and will make long distance management much more feasible.  Flippers in the area are helping drive prices up as well as stabilizing the neighborhoods.  Multi families are more scarce and the prices have been driven up to the point where its tough to get an acceptable return particularly if you are paying a management company.

Michael Ohara · Answer

Short answer: yes, it's worth it. 😀There always the nightmare tenant story and I don't know any rental investor who hasn't had one.  Go in with eyes wide open, run the numbers, have some cash reserves, build an on-ground team, and take the leap. All the best. 🤙🏽

Michael Kiley · Answer

@Cyndy Lester

Cleveland rentals cashflow awesome but don't count on appreciation unless you buy at the bottom of the next cycle. I suggest you find a 40's or 50's bungalow in Parma or in the Cleveland neighborhoods of Westpark, Kamms Corners & Old Brooklyn.  As a long-distance investor, you're the biggest obstacle will be finding a team you can trust.

Cyndy Lester · Answer

Thank you fellow Bigger Pockets members. This information has been recieved well. I do have a rental property here in Houston but would like a bit higher returns so I'm looking to branch out. Thank you @Cory S for your honest opinion. Some things are too good to be true and must be approached with caution.  @James Wise, thank you for the detailed information. I had also looked at Dayton as a possibility as well as others you mentioned. I will do my research and analyze the returns in those areas and hope to really get the ball rolling. Im looking to at least obtain 4 properties with at least an 8% to 12% return, preferably 12% within the next 6 years. I say 6 years because that is how long we will be in Ireland (work transfer) and will be retiring upon return. Again, thank you everyone for your honest information and please do continue to chime in.

Nathan Gesner · Answer

@Cyndy Lester property prices are cheap in the cash flow well, but they are typically lower class properties. That means the cash flow looks great on paper but actual results may not be that good due to increased turnover, higher eviction rates, more cleaning and damage losses, higher maintenance costs, etc.

I've considered pulling the trigger several times but just can't bring myself to do it. The cash flow is appealing and I have a high tolerance for pain but it's just easier to save up and invest in a market I know well, can manage myself, and the whole provide me with strong appreciation..

Frederic Babeux · Answer

To be honest, I think you will not know until you try it. I've read alot on the forums about the lower priced areas and how they're all for slumlords and yada yada yada... Still didn't stop me from buying a duplex in Rochester NY that I renovated following a not so great tenant. But now everything is going well, I've got 2 great tenants that are taking care of the property and was able to increase rents significantly following the renovations.

Was it easy? No, definetly not, but if it was, everybody would do it :)

If you want results that are different than everybody else, you gotta do something different than what they're doing.

Best of luck in your search :)

Cleveland, OH rentals - Worth it?

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