Rental Property Investor · Dayton, OH · Member since 2022 · 11 posts · 6 votes
Hello all! I'm an Ohio native who's primarily invested in Detroit, MI and doing acquisitions for larger funds doing 5-7 deals a month. I'm wanting to replicate this in the Cleveland area. If anyone has some insight into the market it would be greatly appreciated.
What areas/zip codes are best for rentals?
Desired cap rate from those of you investing currently?
Month-to-Month leases or multi-month?
The average price of a unit w/ a good tenant? Average preferred rent?
Looking forward to hearing your thoughts and connecting with you all!
We've been in the Cleveland rental market since 1995. We like the eastern inner ring suburbs if you are looking for a blend of cash flow and predictability / stability. Cap rates range from 6-9 in these areas. If you are focused primarily on cash flow, consider the following Cleveland neighborhoods: North Collinwood, Lee Harvard, Old Brooklyn, and Clark Fulton. Depending on product type and quality, you are likely looking at 8-10+ cap rates in these areas. I would be extremely cautious when you proceed. You will encounter what appears to be great cash flow in some other areas of Cleveland but, in most cases, it's fools gold. If you can't rely on the consistency and predicatbility of rent collections in some of these areas and the properties are not manageable, the cap rate calculation is virtually useless.
All of our properties are rented on 1 year leases.
Rent ranges as follows (depending on numerous factors):
1 bed $525-$795
2 bed $725-$1095
3 bed $875-$1350
4 bed $975-$1500
Let me know if you want to talk further. I'd be happy to put you in touch with the necessary people to help execute your model.
Investor · Tyler, TX · Member since 2021 · 33 posts · 31 votes
4y
@Jacob Miller I'd recommend getting some recommendations for property managers and give them a call to talk. You'll get a two-for-one: you get market insight from an expert and can vet a future property manager all in one call.
Rental Property Investor · Dayton, OH · Member since 2022 · 11 posts · 6 votes
4y
@Blake Choisnet Thank you for the suggestion! I am more so looking for feedback from an investor's standpoint. Where have they had success and what seems to be the environment to them?
We've been in the Cleveland rental market since 1995. We like the eastern inner ring suburbs if you are looking for a blend of cash flow and predictability / stability. Cap rates range from 6-9 in these areas. If you are focused primarily on cash flow, consider the following Cleveland neighborhoods: North Collinwood, Lee Harvard, Old Brooklyn, and Clark Fulton. Depending on product type and quality, you are likely looking at 8-10+ cap rates in these areas. I would be extremely cautious when you proceed. You will encounter what appears to be great cash flow in some other areas of Cleveland but, in most cases, it's fools gold. If you can't rely on the consistency and predicatbility of rent collections in some of these areas and the properties are not manageable, the cap rate calculation is virtually useless.
All of our properties are rented on 1 year leases.
Rent ranges as follows (depending on numerous factors):
1 bed $525-$795
2 bed $725-$1095
3 bed $875-$1350
4 bed $975-$1500
Let me know if you want to talk further. I'd be happy to put you in touch with the necessary people to help execute your model.
Contractor · OR · Member since 2021 · 42 posts · 33 votes
4y
Hey Jacob, I just 1031'd out of the Cleveland market. Below are a list of items I ran into that hopefully you can skip:
Bought a Frankenstein triplex (wires, plumbing, venting, all crossed multiple units) - Any time I had a repair it usually effected multiple units and drywall/paint/flooring had to be replaced.
Utility Companies - I was charged $3k in one month for a sewer bill. I was sent a notice of a leak and had a plumber get in as soon as possible. When I tried to push back the utility company said to prove it was a misreading, pay the balance or water would be shut off
Contractors/tenants - when I purchased the place it was occupied and then covid hit. I was unable to evict on non paying tenants for over a year. After the moved out they stole the appliances and left the place a mess. When I did have repairs the contractors had issues getting access even after multiple notifications to the tenants. Contractors will charge what they think they can get away with. I work in construction mgmt so I would constantly reel in the scope.
Recommendations - get a really good property management company, start with a single family or at least separate meters, know the additional requirements on Cleveland landlords (yearly inspection fee, lead fee, etc) walk the house prior to buying. Photos are very deceiving.
Hope this helps. There is definitely opportunity but as the post above stated there is fools gold also. Best of luck!
Lake County Ohio I have not seen these problems in Mentor and Painesville. Cleveland is trying to be more liberal like California. That’s why I invested in Lake County, Ohio. They don’t follow the Cleveland tenant friendly policies!!
I have a 57 unit in Mentor. The address is 7559 Mentor Ave. We purchased it Aug of 2019, before Covid. We purchased it at $2,000,000 and it is now approaching $5,000,000 valuation now. This Aug of 2022 will be 3 years we have owned the complex. Another complex down the street that we were modeling our renovation and business plan after, just sold for $85,000 a unit for 72 units. They purchased about the same time we did and they paid $47,000 a unit in 2019 and we paid $35,000 a unit.
It is a really nice area. The medium level family income is over $75,000 a year now I believe!!
We also have about 100 units in 7 apartment complexes in Painesville and I like that area too. They have more like $45,000-$50,000 median level family income there.
Really landlord friendly in Lake County in general I have found.
Hello all! I'm an Ohio native who's primarily invested in Detroit, MI and doing acquisitions for larger funds doing 5-7 deals a month. I'm wanting to replicate this in the Cleveland area. If anyone has some insight into the market it would be greatly appreciated.
What areas/zip codes are best for rentals?
Desired cap rate from those of you investing currently?
Month-to-Month leases or multi-month?
The average price of a unit w/ a good tenant? Average preferred rent?
Looking forward to hearing your thoughts and connecting with you all!
Real Estate Agent · Cleveland · Member since 2022 · 5 posts · 13 votes
4y
Hello @Jacob Miller, I have been investing in the Cleveland market for 5 years now. I have invested in various zip codes, neighborhoods and suburbs. It really depends on what you are looking for......the higher the ROI on paper the higher is the risk that it will not materialize and on the other hand the lower the ROI the more stability you can expect in terms of quality of tenant and condition of the property. Personally I like the eastern suburbs of Maple Heights (44137), Garfield Heights (44125 and some 44105), Bedford (44146) and some pockets of Cleveland that are adjacent these neighborhoods (some of 44105 and 44128).
In terms of ROI from Cash Flow the market has changed dramatically since I bought my first rental in Jan 2017. The rents have risen, but property values have risen much fast, bringing down the ROI from 10%-14% to 7%-10%....but of course considering that you can leverage these with 30 year financing and low interest rates, these are still amazing investment vehicles.
I also had good experiences with Section 8......Yes I know many people don't like the program.....but from my experience it can work out great.....there are far more vouchers out there then landlords willing to take them and it allowed me to cherry pick the best applicants and have a lot of stability and low turnover rates as a result of that.
Don't hesitate to reach out if you'd like to go into a deeper conversation. I can connect you with the right PMs, Roofer, Plumber, Electrician, General Contractor, Title company etc. and helped you avoid the mistakes that I did when I just started out in this part of the country.