Cleveland City Council Passes Housing Overhaul

[Erin Dorsey Robinson]

Hey everyone- I ran across an article today and shared with my clients and fellow investors. Thought I'd post on here as well. Cleveland City Council has passed a series of new regulations targeting landlords who allow their properties to fall into disrepair.  The new rules will go into effect this Spring (2024) and include measures such as registration of vacant housing, inspection requirements to transfer property and the requirement that out of state investors have a "local agent in charge", a representative on the ground in Cleveland to be held accountable for the condition of the property. Staying informed is still important even if you're not living in the place where you invest. What you don't know can still become a headache.

Link To Article

(photo from the article)

[Jay Hinrichs]

Quote from @Jay Hinrichs:

Quote from @Kevin Sobilo:

Quote from @Jay Hinrichs:

Quote from @Chris Seveney:

Quote from @Erin Dorsey Robinson:

Hey everyone- I ran across an article today and shared with my clients and fellow investors. Thought I'd post on here as well. Cleveland City Council has passed a series of new regulations targeting landlords who allow their properties to fall into disrepair.  The new rules will go into effect this Spring (2024) and include measures such as registration of vacant housing, inspection requirements to transfer property and the requirement that out of state investors have a "local agent in charge", a representative on the ground in Cleveland to be held accountable for the condition of the property. Staying informed is still important even if you're not living in the place where you invest. What you don't know can still become a headache.

Link To Article

(photo from the article)

 What some jurisidictions are doing is fining sellers for illegal transfers when there are issues with property. For example, if you have overgrown grass at 123 Main st they will stop you from selling 456 east street until the violations on other properties are corrected.

that already happens in Cleveland.

I'm guessing having a single LLC for each property is more common there to avoid those situations.

well this client of mine had about 30 props there in cleveland so I am not sure 30 LLC would be to workable.. but he got sideways with the city on one property that had issues did not get it fixed in time city took him to court Judge froze any property in that name until issues were solved.. Well did not freeze one could still just quit claim it with no title insurance but once the city saw the transfer they hit him with a 5k fine.

Ok on a little soap box here on blaming OOS investors for cities dilapidated housing issues.

I have been working in the Rust belt deep south in these sub 125k markets now for 22 years funding flippers and literally thousands of OOS BRRR buyers. And keep in mind I am just the bridge lender so folks can BRRR and when they refi I am paid out I dont own any of these long term.

The OOS investor acquires a home normally from a fix and flipper be it a turnkey out fit or off of MLS and the agent they are working for like a Holton Wise there in Cleveland for instance.

So before they buy it the homes were in disrepair and vast majority are bought from locals who have failed to maintain the property but live there as owner occs.. those folks simply dont get hounded for violations like OOS or non owner occ props.

What I have seen is when neighborhoods start to go down hill when they start to turn from predominately owner occ to rentals or the school scores go way down.. Those that can afford a home move and landlords replace them..

Then you  have out of state buyers that simply do not know what they do not know.. they tend to be influenced by on line reports of what one should make on a property IE it MUST Cash flow day one with minimum down. So as we know this only happens in rental areas and those areas are simply more prone to theft and tenant base can be much tougher on the home.

I have seen this play out a number of times.. OOS investor who maybe only has 50k in cash uses 30k to buy a 125k rental.. then they get hit with theft or a really bad tenant does 10k of damage and does not pay for 6 months.. they get with a PM that does not do a great job .. So day one thinking 20k for reserves starts to dwindle to the point that they run out of money. And now the house needs more rehab they no longer have the funds and the cycle repeats..house goes vacant thieves go in and strip it.. drug folks get in there and use it for shooting up and squatting kids go in and vandalize for fun. etc etc.. now the OOS investor just gives up and walks away. And some wholesaler snags it from them if there is enough equity to sell it again and rehab it again or it goes to foreclosure and the cycle repeats.  

OOS investor tried their hardest but went broke.. Because the house they bought un knowingly was near impossible to keep upright. given the location.. this is my some of our BP members have done heat maps on cities to point out these neighborhoods..

However Investors can be their own worst enemy trying to go for the highest returns on paper which of course have the absolute highest risk factors.

In Jackson Mississippi  South Jackson to be specific I have funded well over 500  props there and more than 10 I have funded 2 to 3 times over the last 20 years although I am not longer doing deals in South Jackson as I don't want to encourage out of state investors into those super high risk areas.

Locals that's a different story.. Just like this is a Cleveland thread you get over to West Cleveland and a few others stay out of the Bad C and D it can go just fine you go for the highest returns in East Cleveland you know the 20 caps and its far and few between that can make those work from OOS ..