Experience of OOS investing in Cleveland after 1.5 years.

[Luka Jozic]

Hi everyone, I started investing in Cleveland about a year and a half ago and have acquired 6 LTRs (SFH and MFH) using mainly the BRRRR method in C areas. I've done fairly big renovations where in most cases, Im replacing almost everything in/on the house. First year has been tons of learning and despite all the research and preparation I did, I still did mistakes and learned things the hard way. I went with one of the biggest PMs that everybody vouched for, yet it took them forever to even place a tenant, and once they did, the tenants never paid on time. Additionally, despite the houses being newly renovated, every month there were new expenses and something breaking, almost as if they want me to not cashflow. The PM said they don't up-charge, but most repairs and expenses were ridiculously high. The result of this? No cashflow, in fact Im in the negative for almost every property so far, and yes I do put aside money for vacancies, capex, and repairs. I finally switched PMs recently and the new one seems much better but Im still getting pretty frequent repairs though much cheaper than the previous PM. The problem is that in this market, getting $2-300 a month cashflow is about as good as it gets, and one furnace, one turnover or whatever and that takes out the cashflow for that year, or even puts you in the negative.

Lets just say the experience hasn't been great, yet. Im trying to stay hopeful that it will turn around but I just keep receiving blow after blow. Just recently got hit with a 10K sewer line repair. I know, its my fault I didn't inspect the sewer line but in my defense, having such inspection contingencies makes it nearly impossible to find a viable BRRRR deal, as there are several investors lined up ready to pay more, in cash, and no contingencies. Im now starting to doubt wether or not Cleveland is actually a good market to invest in? Majority of the houses are old and require frequent repairs in addition to a poor tenant base that can't pay on time and don't care about their credit. On paper it looks good, but the reality is a different story. Im wondering if other markets might be better, with somewhat newer houses and higher quality tenants? But the thing with those markets are you'd be happy to break even, so even if repairs are less and tenant quality is better, I feel like it would end up being the same result.

For those of you that invest in Cleveland, do you have similar experiences? If not, what do you think you might be doing differently to make it work better?

[Mike Dymski]

What is your ARV in excess of your cost basis? If you have large equity gain, things are fine (and you can ride it out or simply sell).

[Jonathan Weinberger]

hey mate -- this sounds like a problem with your network and team. Something to note about these markets is you do need economy of scale. 

I talk to a lot of people that want to get started in detroit where I invest, and if they can't quickly scale to 10 doors, I tell them to steer clear. With 10 doors, you're looking at $10k/mo in guaranteed rent from section 8. (probably more) -- It's unlikely you'll hit $10k in expenses. The 10 doors all cover the expenses of the rest and you'll finally cash flow. 

Get a better team. Do better rehabs. 

[James Hamling]

Quote from @Luka Jozic:

Quote from @Bob Stevens:

Quote from @Luka Jozic:

Hi everyone, I started investing in Cleveland about a year and a half ago and have acquired 6 LTRs (SFH and MFH) using mainly the BRRRR method in C areas. I've done fairly big renovations where in most cases, Im replacing almost everything in/on the house. First year has been tons of learning and despite all the research and preparation I did, I still did mistakes and learned things the hard way. I went with one of the biggest PMs that everybody vouched for, yet it took them forever to even place a tenant, and once they did, the tenants never paid on time. Additionally, despite the houses being newly renovated, every month there were new expenses and something breaking, almost as if they want me to not cashflow. The PM said they don't up-charge, but most repairs and expenses were ridiculously high. The result of this? No cashflow, in fact Im in the negative for almost every property so far, and yes I do put aside money for vacancies, capex, and repairs. I finally switched PMs recently and the new one seems much better but Im still getting pretty frequent repairs though much cheaper than the previous PM. The problem is that in this market, getting $2-300 a month cashflow is about as good as it gets, and one furnace, one turnover or whatever and that takes out the cashflow for that year, or even puts you in the negative.

Lets just say the experience hasn't been great, yet. Im trying to stay hopeful that it will turn around but I just keep receiving blow after blow. Just recently got hit with a 10K sewer line repair. I know, its my fault I didn't inspect the sewer line but in my defense, having such inspection contingencies makes it nearly impossible to find a viable BRRRR deal, as there are several investors lined up ready to pay more, in cash, and no contingencies. Im now starting to doubt wether or not Cleveland is actually a good market to invest in? Majority of the houses are old and require frequent repairs in addition to a poor tenant base that can't pay on time and don't care about their credit. On paper it looks good, but the reality is a different story. Im wondering if other markets might be better, with somewhat newer houses and higher quality tenants? But the thing with those markets are you'd be happy to break even, so even if repairs are less and tenant quality is better, I feel like it would end up being the same result.

For those of you that invest in Cleveland, do you have similar experiences? If not, what do you think you might be doing differently to make it work better?

' 

 I TRIED to help you but you " know better". I get on avg 800 per month NET income 15- 20% NET (based on cash purchases) on SF, and more on my duplex's. My maintenance is little to nothing as we do the reno correctly. I also tried to help you with PM I'm aware of them all 99% are terrible and will charge you 3k to replace a furnace when the real cost is about 1600. I just got $900 for a 1 br in East Cleveland. I'm going to get 1500 for a 3 br in Lee Harvard, fully renovated all in 75k, do the math :) 

All the best 

Im not interested in buying turnkey and also not buying cash, I would run out of money real quick. I need to be doing BRRRR thats the only way to scale somewhat fast. Im glad you're doing good.

 Really, that's the only or best way to scale? I couldn't disagree more.

2yr ago picked up a new built A class townhome, A class area, garners A class tenants. Yes it was in that $300k+ range. Yes, yr 1 cashflow was very tight but getting $2,700mnth rents, 0 cap-x 0 maintenance helps much. 

Now, time and appreciation has done it's thing and it's clocked nearly $80K appreciation. Rent's have continued to appreciate and when recently had vacancy upcoming I had it rented in 17 days, kid you not, weeks before exiting tenant was out making for a nice 0 vacancy rate. 

So I ask you, who's getting further ahead faster? The one bleeding out on all the "and-then's" or the one sitting back with premium inventory that premium tenants will pay premium rents for, just accruing equity for a few more years to rinse and repeat before cap-x/maintenance cycle starts. 

And better yet 80%+ of this asset class tenants are home owners by nature, divorcee's in process, there living standards are home-owner conditioned. 

As Jay pointed out all this reads of what I'd call "par for the course" in D/C class. Been there, done that, no thank you. I will stick to divorcees, it's definitively recession proof. 

[Marcus Auerbach]

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

[Luka Jozic]

Quote from @Engelo Rumora:

Quote from @Chris Clothier:

@Luka Jozic

I was on a podcast recently and talked a little about what you are experiencing. I read this as someone using a short-term lens to focus on a long-term issue. In your thread, you are worried about short-term KPIs like monthly cash flow, yet you purchased the properties to follow the BRRRR method.

The social side of Biggerpockets, like newsletters, blogs, and SM sites, is part of the problem.  Cash flow is constantly promoted and pushed, and often, the personalities lack long-term experience, so they can't talk about the best reasons we should be investing.  

You purchased six properties, and we have to assume, based on your post, that you purchased and renovated them for below a current market value.  If done correctly, you can refinance most, if not all, of your initial funds back out of the properties.  You can eventually refinance all or most of your funds if not done correctly.  Your properties have needed constant work, making you negative for the first year.  In other words, your renters have covered a majority of your costs of ownership this year, including covering your debt, and you have to put some additional money in, which raises your cost basis. However, it doesn't read like that has been substantial.  

This is investment real estate.  You have to expect costs, headaches, and surprises.  Those things can and will hurt your monthly KPIs occasionally and sometimes for long periods.  However, over time, if a renter is covering a majority of your cost of ownership and even allowing you to get the added benefit of putting money away into a rainy day fund, you are winning the real estate game.  

You are controlling significant assets with little money and using the revenue they generate to pay for them.  Over the next 7-10 years, these properties will fluctuate up and down in value based on the current economy; however, real estate will move up and to the right over time.  At the same time, someone else reduces your debt, and you get to use the tax code to improve your tax situation legally.  

My advice is to be wise but continue.  Be smart and invest wisely, constantly learning from each transition.  Perhaps you do things differently with your subsequent purchase or your next management company.  Whatever you do, don't focus on the monthly KPIs.  You bought long-term rentals, so be a long-term investor.  You did it passively, so don't expect substantial short-term returns.  Be a long-term investor focusing on controlling as many assets as possible most safely.  I tip my hat to you because you are way ahead of many of your peers.  The ability to take action can be both brave and foolish.  You sound like the brave side of the coin in that you did due diligence and respected the process.  You also took quick action when things were not going as expected.  From what I read, I think you are on track for success.  You have to allow time to do its job.  Time is the #1 ingredient in a long-term investor's success.  Their success depends on how much initial action they take to build their portfolio.

When Chris posts, everyone should read.

I know he doesn't like to be called the "Godfather" so I will just say he is the "Turnkey Stud" haha

100% agreed with this mate:

"I tip my hat to you because you are way ahead of many of your peers. The ability to take action can be both brave and foolish. You sound like the brave side of the coin in that you did due diligence and respected the process. You also took quick action when things were not going as expected. From what I read, I think you are on track for success. You have to allow time to do its job. Time is the #1 ingredient in a long-term investor's success. Their success depends on how much initial action they take to build their portfolio."

Just to add to Chris's post.

Time is the best friend of a good decision and the worst enemy of a bad decision.

Keep endeavoring to make good decisions and ask questions on the forum like you did if in doubt.

You will have a few bum jackers like myself that will happily share an opinion on the situation.

Your job is to syphon through all those opinions and as they should mold your decision making for the better 🙏

Appreciate it to both of you! Yeah right now Im just gonna hold off for a little and stabilize, then I'll make a call if I will continue in Cleveland or maybe try here in Tampa. Tampa is great in the sense that the tenant quality is typically very high and appreciation as well, but finding something that would even break even will be very hard. Rent by room is an option that many people do here but even then it's not easy, and several randoms living under the same roof calls for its own problems and likely a lot more turnovers, so I'll see. I've also considered bigger multifamily 5+ units but need to research it more. Normal residential BRRRR just seems very difficult right now, but I also don't wanna put 25% down on every property I buy.

And to answer someone that asked about ARV, yes I do create a big chunk of equity in my BRRRR properties so at least I have that.

[Engelo Rumora]

Quote from @Jonathan Weinberger:

hey mate -- this sounds like a problem with your network and team. Something to note about these markets is you do need economy of scale. 

I talk to a lot of people that want to get started in detroit where I invest, and if they can't quickly scale to 10 doors, I tell them to steer clear. With 10 doors, you're looking at $10k/mo in guaranteed rent from section 8. (probably more) -- It's unlikely you'll hit $10k in expenses. The 10 doors all cover the expenses of the rest and you'll finally cash flow. 

Get a better team. Do better rehabs. 

100% agreed mate,

Safety comes in the volume.

Something that I've "preached" for many years.

It's not worth the time, money or even risk buying 1 or 2 or even 3 properties unless an investor has a growth type mindset and a will to scale to 10+.

It's very simple, you own 1 and it goes vacant.

That's a 100% impact on your income.

You own 10 and 1-2 to go vacant.

That's only a 10-20% impact on your income.

It's also a very high likelihood that problems will always exist with 1 or 2 properties at any given moment...

Plus, such markets (Ohio and Michigan) don't appreciate as much as many others like a Texas and Florida for example.

Michigan and Ohio are slow movers and only recently (10+ years later) caught up to some of the other "higher flying" markets from a yearly growth percentage.

Much success

[Engelo Rumora]

Quote from @Marcus Auerbach:

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

Hi Marcus,

There are many ways to skin a cat per se lol

Personally, I'd rather have volume and 10 "in da hood" where the numbers don't lie and where I know what I'm doing.

Then buying using a tonne of leverage and hoping the market will appreciate.

"Hoping" for me was never a strategy as the future is unpredictable.

I hoped my $480,000 condo in Chicago would appreciate and it didn't move since 2018.

My tenant a crypto exec has been paying me $3,000 in rent on the 28th of each month like clockwork for 5 years now.

No capex, no issues at all and that has been a breeze.

3% ROI isn't sexy enough to me tho 🤷‍♂️

I'd probably be cheering right now if it moved up in value but it's been a dead deal in my eyes.

But it is what it is.

The numbers in a deal TODAY per se don't rely on hope and are a more predictable outcome.

Granted, the numbers need to be "worked" and a more "hands on" approach is needed in such markets.

Thanks 

[Engelo Rumora]

Quote from @Luka Jozic:

Quote from @Engelo Rumora:

Quote from @Chris Clothier:

@Luka Jozic

I was on a podcast recently and talked a little about what you are experiencing. I read this as someone using a short-term lens to focus on a long-term issue. In your thread, you are worried about short-term KPIs like monthly cash flow, yet you purchased the properties to follow the BRRRR method.

The social side of Biggerpockets, like newsletters, blogs, and SM sites, is part of the problem.  Cash flow is constantly promoted and pushed, and often, the personalities lack long-term experience, so they can't talk about the best reasons we should be investing.  

You purchased six properties, and we have to assume, based on your post, that you purchased and renovated them for below a current market value.  If done correctly, you can refinance most, if not all, of your initial funds back out of the properties.  You can eventually refinance all or most of your funds if not done correctly.  Your properties have needed constant work, making you negative for the first year.  In other words, your renters have covered a majority of your costs of ownership this year, including covering your debt, and you have to put some additional money in, which raises your cost basis. However, it doesn't read like that has been substantial.  

This is investment real estate.  You have to expect costs, headaches, and surprises.  Those things can and will hurt your monthly KPIs occasionally and sometimes for long periods.  However, over time, if a renter is covering a majority of your cost of ownership and even allowing you to get the added benefit of putting money away into a rainy day fund, you are winning the real estate game.  

You are controlling significant assets with little money and using the revenue they generate to pay for them.  Over the next 7-10 years, these properties will fluctuate up and down in value based on the current economy; however, real estate will move up and to the right over time.  At the same time, someone else reduces your debt, and you get to use the tax code to improve your tax situation legally.  

My advice is to be wise but continue.  Be smart and invest wisely, constantly learning from each transition.  Perhaps you do things differently with your subsequent purchase or your next management company.  Whatever you do, don't focus on the monthly KPIs.  You bought long-term rentals, so be a long-term investor.  You did it passively, so don't expect substantial short-term returns.  Be a long-term investor focusing on controlling as many assets as possible most safely.  I tip my hat to you because you are way ahead of many of your peers.  The ability to take action can be both brave and foolish.  You sound like the brave side of the coin in that you did due diligence and respected the process.  You also took quick action when things were not going as expected.  From what I read, I think you are on track for success.  You have to allow time to do its job.  Time is the #1 ingredient in a long-term investor's success.  Their success depends on how much initial action they take to build their portfolio.

When Chris posts, everyone should read.

I know he doesn't like to be called the "Godfather" so I will just say he is the "Turnkey Stud" haha

100% agreed with this mate:

"I tip my hat to you because you are way ahead of many of your peers. The ability to take action can be both brave and foolish. You sound like the brave side of the coin in that you did due diligence and respected the process. You also took quick action when things were not going as expected. From what I read, I think you are on track for success. You have to allow time to do its job. Time is the #1 ingredient in a long-term investor's success. Their success depends on how much initial action they take to build their portfolio."

Just to add to Chris's post.

Time is the best friend of a good decision and the worst enemy of a bad decision.

Keep endeavoring to make good decisions and ask questions on the forum like you did if in doubt.

You will have a few bum jackers like myself that will happily share an opinion on the situation.

Your job is to syphon through all those opinions and as they should mold your decision making for the better 🙏

Appreciate it to both of you! Yeah right now Im just gonna hold off for a little and stabilize, then I'll make a call if I will continue in Cleveland or maybe try here in Tampa. Tampa is great in the sense that the tenant quality is typically very high and appreciation as well, but finding something that would even break even will be very hard. Rent by room is an option that many people do here but even then it's not easy, and several randoms living under the same roof calls for its own problems and likely a lot more turnovers, so I'll see. I've also considered bigger multifamily 5+ units but need to research it more. Normal residential BRRRR just seems very difficult right now, but I also don't wanna put 25% down on every property I buy.

And to answer someone that asked about ARV, yes I do create a big chunk of equity in my BRRRR properties so at least I have that.

Thanks Luka,

I'm sure you can find a banger deal in Tampa or almost anywhere for that fact.

Just work the market.

Nothing works unless you do lol

For example, we buy a $#%@ load of motivated seller lists and my remote team cold calls all day.

They are polite, professional and persistent on the phone.

Keeping good record and track everything.

I'm confident that if we re-target any other market in the US, we could find deals at 30-50% of market value.

Just gotta smile and dial lol

All the best mate

[V.G Jason]

Quote from @Luka Jozic:

Quote from @Christian Styles:

Hey Luka, sorry you're not loving Cleveland at the moment, I'm interested to know specifically where your properties are located. We've found that there are neighborhoods in the Cleveland Metro where it's nearly impossible to cashflow, As Jay said tenant quality being one of the main motivators behind that.

One is in Toledo, the Cleveland ones are in Homeworth Ave 44125, Huntmere Ave 44110, W 68th St 44102, Bryce Ave 44128, and Walton Ave 44113. 

They're cash-flowing well on paper, but not in reality because I just keep getting hit by expenses. My last turnover for the Toledo property was over 6K, and the property was left in pretty good condition.

And to respond to Jay, I'd love to be in B areas, but those properties are rarely suitable for BRRRR and always go for top dollar, in my experience they're just not viable for BRRRR unless you wanna be cashflow negative. So its a catch 22.

That's why these investments just don't work in bold. I would tap out and consolidate into better property(or properties) in other areas. You say those don't BRRR & attract top dollar, the best value in BRRR right now is primo properties cause you're not getting a 1:1 on any upgrade you're getting higher. Go add a bathroom to a C/D property vs a A-/B+ property, you'll pay the same amount but get a way better return. And secondly you say those are cash flow negative, but so are your junky properties that a tenant turn eats away 18-24 months of gross profit. And cash flow negative is a function simply of the leverage in a deal, you can be CF positive you just need to leave more cash in the deal and it's worth it for a better property.

Completely different way of looking at things and you're going to be forced to evaluate like this in a new higher rate era plus housing scarcity. Better is better, less is more. 

[Dan H.]

If I add $50k or better $100k more value than the cost of the value add, do I care if I am negative a couple hundred a month?  

Am I more likely to be able to add $50k or $100k of value above cost in a high Cost RE market or a low cost RE market?  

In addition, high cost RE markets traditional have greater rent growth than low cost RE markets.  This implies my cash flow will improve quickly and over a long hold is likely to have better cash flow than the low RE cost market that had better initial cash flow.  Investors often equate initial cash flow with long term cash flow but the historical relationship is poor.  Typically the higher RE cost market will have the better cash flow (excluding an extract of value) over a long hold.  

My last purchase is worth over $700k more than I purchased it for 2.5 years ago.  Cost of value add was $120k, so over $580k of increase above costs.  I do not see pulling off this type of increase in value in class C or D markets. 

I own class C+ to class A properties.  If I were to do it over again, I would strive for higher class properties and would not have purchased anything below class B.

Higher class properties typically have better tenants, lower turn over costs, less tenant issues, etc.  The maintenance/cap ex costs will likely be less these the lower rent class c area.

Some things for OP to ponder.  

Good luck

[Marcus Auerbach]

Quote from @Engelo Rumora:

Quote from @Marcus Auerbach:

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

Hi Marcus,

There are many ways to skin a cat per se lol

Personally, I'd rather have volume and 10 "in da hood" where the numbers don't lie and where I know what I'm doing.

Then buying using a tonne of leverage and hoping the market will appreciate.

"Hoping" for me was never a strategy as the future is unpredictable.

I hoped my $480,000 condo in Chicago would appreciate and it didn't move since 2018.

My tenant a crypto exec has been paying me $3,000 in rent on the 28th of each month like clockwork for 5 years now.

No capex, no issues at all and that has been a breeze.

3% ROI isn't sexy enough to me tho 🤷‍♂️

I'd probably be cheering right now if it moved up in value but it's been a dead deal in my eyes.

But it is what it is.

The numbers in a deal TODAY per se don't rely on hope and are a more predictable outcome.

Granted, the numbers need to be "worked" and a more "hands on" approach is needed in such markets.

Thanks 

Hi Engelo, you have been doing this for a long time and I know you have the skills and tenacity to manage high-cash-flow properties, but you have to admit, you are working hard for your cash flow, this is not passive at all. And you are local! OOS is so much harder!

And there is also a hope component involved. You are taking a chance with every tenant and you hope they are not trashing your house and you don't have an eviction.

If your condo did not appreciate it over the last 6 (unicorn!!) years, I would definitely sell it pretty soon, because if/when the market weakens it will probably start losing value. I think you want both, cash flow and appreciation, that is the sweet spot. Especially in Milwaukee.

And I would argue that average appreciation over long periods of time, have not much to do with hope. I am basically shorting the US-dollar. And all currencies will eventually go to zero, Warren Buffet was not the first one to say this.

Once I understood this, I started looking at leverage in a totally different way. We are only very moderately leveraged, but I am in no rush to change that and rather use the cash flow to re-invest either into upgrades (we are doing a ton of driveways this year) or more RE.

I don't think there is a right or wrong way, like you said there are many different ways, I just find myself adjusting every year a bit more in that direction.

[Jay Hinrichs]

Quote from @Marcus Auerbach:

Quote from @Engelo Rumora:

Quote from @Marcus Auerbach:

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

Hi Marcus,

There are many ways to skin a cat per se lol

Personally, I'd rather have volume and 10 "in da hood" where the numbers don't lie and where I know what I'm doing.

Then buying using a tonne of leverage and hoping the market will appreciate.

"Hoping" for me was never a strategy as the future is unpredictable.

I hoped my $480,000 condo in Chicago would appreciate and it didn't move since 2018.

My tenant a crypto exec has been paying me $3,000 in rent on the 28th of each month like clockwork for 5 years now.

No capex, no issues at all and that has been a breeze.

3% ROI isn't sexy enough to me tho 🤷‍♂️

I'd probably be cheering right now if it moved up in value but it's been a dead deal in my eyes.

But it is what it is.

The numbers in a deal TODAY per se don't rely on hope and are a more predictable outcome.

Granted, the numbers need to be "worked" and a more "hands on" approach is needed in such markets.

Thanks 

Hi Engelo, you have been doing this for a long time and I know you have the skills and tenacity to manage high-cash-flow properties, but you have to admit, you are working hard for your cash flow, this is not passive at all. And you are local! OOS is so much harder!

And there is also a hope component involved. You are taking a chance with every tenant and you hope they are not trashing your house and you don't have an eviction.

If your condo did not appreciate it over the last 6 (unicorn!!) years, I would definitely sell it pretty soon, because if/when the market weakens it will probably start losing value. I think you want both, cash flow and appreciation, that is the sweet spot. Especially in Milwaukee.

And I would argue that average appreciation over long periods of time, have not much to do with hope. I am basically shorting the US-dollar. And all currencies will eventually go to zero, Warren Buffet was not the first one to say this.

Once I understood this, I started looking at leverage in a totally different way. We are only very moderately leveraged, but I am in no rush to change that and rather use the cash flow to re-invest either into upgrades (we are doing a ton of driveways this year) or more RE.

I don't think there is a right or wrong way, like you said there are many different ways, I just find myself adjusting every year a bit more in that direction.

most condos historically are not great appreciation plays. its a place to live and enjoy.. unless said condo was bought in Miami in 2008 to 2010 :)

[Scott Bowen]

@Luka Jozic BRRRR is still a good strategy - don't let anyone tell you otherwise. But gone are the days where you can expect to pull all your money out of the deal and still cash flow $200+ a month. I aim for 10-20% CoC on BRRRR deals.

Cleveland wouldn't be my market of choice given how old most of the houses are, but I know a lot of investors who have success there, so it's definitely viable. For C/C- neighborhoods you usually need to scale to 10+ doors; it's a numbers game. 

[Engelo Rumora]

Quote from @Marcus Auerbach:

Quote from @Engelo Rumora:

Quote from @Marcus Auerbach:

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

Hi Marcus,

There are many ways to skin a cat per se lol

Personally, I'd rather have volume and 10 "in da hood" where the numbers don't lie and where I know what I'm doing.

Then buying using a tonne of leverage and hoping the market will appreciate.

"Hoping" for me was never a strategy as the future is unpredictable.

I hoped my $480,000 condo in Chicago would appreciate and it didn't move since 2018.

My tenant a crypto exec has been paying me $3,000 in rent on the 28th of each month like clockwork for 5 years now.

No capex, no issues at all and that has been a breeze.

3% ROI isn't sexy enough to me tho 🤷‍♂️

I'd probably be cheering right now if it moved up in value but it's been a dead deal in my eyes.

But it is what it is.

The numbers in a deal TODAY per se don't rely on hope and are a more predictable outcome.

Granted, the numbers need to be "worked" and a more "hands on" approach is needed in such markets.

Thanks 

Hi Engelo, you have been doing this for a long time and I know you have the skills and tenacity to manage high-cash-flow properties, but you have to admit, you are working hard for your cash flow, this is not passive at all. And you are local! OOS is so much harder!

And there is also a hope component involved. You are taking a chance with every tenant and you hope they are not trashing your house and you don't have an eviction.

If your condo did not appreciate it over the last 6 (unicorn!!) years, I would definitely sell it pretty soon, because if/when the market weakens it will probably start losing value. I think you want both, cash flow and appreciation, that is the sweet spot. Especially in Milwaukee.

And I would argue that average appreciation over long periods of time, have not much to do with hope. I am basically shorting the US-dollar. And all currencies will eventually go to zero, Warren Buffet was not the first one to say this.

Once I understood this, I started looking at leverage in a totally different way. We are only very moderately leveraged, but I am in no rush to change that and rather use the cash flow to re-invest either into upgrades (we are doing a ton of driveways this year) or more RE.

I don't think there is a right or wrong way, like you said there are many different ways, I just find myself adjusting every year a bit more in that direction.

Hi Marcus,

Thanks for your comment.

Definitely working very hard but so are you IMO.

Investing for cashflow or appreciation, all of us real estate folks have to work hard one way or the other.

What is "passive" at the end of the day?

Nothing is truly "passive" and a big misconception with new folks wanting to enter the real estate arena.

For example, just bought a 6 unit using leverage and trying to secure a loan was a disaster of a process.

I can only imagine what others have to go through on every time they purchase a property using leverage.

But then again, I'm bias to the "cash only" approach.

The constantly changing conditions, terms, keeping tight bookkeeping records and tax returns in order and regularly manipulating the BS credit score algorithm.

Placing good tenants is more a skill then hope.

It took me 10+ years to fully wrap my head around using leverage the right way and being able to "manipulate" the system to get better rates with a quicker turn around.

Keep being great thanks for your reading and replying to my comments 🙏

[Engelo Rumora]

Quote from @V.G Jason:

Quote from @Luka Jozic:

Quote from @Christian Styles:

Hey Luka, sorry you're not loving Cleveland at the moment, I'm interested to know specifically where your properties are located. We've found that there are neighborhoods in the Cleveland Metro where it's nearly impossible to cashflow, As Jay said tenant quality being one of the main motivators behind that.

One is in Toledo, the Cleveland ones are in Homeworth Ave 44125, Huntmere Ave 44110, W 68th St 44102, Bryce Ave 44128, and Walton Ave 44113. 

They're cash-flowing well on paper, but not in reality because I just keep getting hit by expenses. My last turnover for the Toledo property was over 6K, and the property was left in pretty good condition.

And to respond to Jay, I'd love to be in B areas, but those properties are rarely suitable for BRRRR and always go for top dollar, in my experience they're just not viable for BRRRR unless you wanna be cashflow negative. So its a catch 22.

That's why these investments just don't work in bold. I would tap out and consolidate into better property(or properties) in other areas. You say those don't BRRR & attract top dollar, the best value in BRRR right now is primo properties cause you're not getting a 1:1 on any upgrade you're getting higher. Go add a bathroom to a C/D property vs a A-/B+ property, you'll pay the same amount but get a way better return. And secondly you say those are cash flow negative, but so are your junky properties that a tenant turn eats away 18-24 months of gross profit. And cash flow negative is a function simply of the leverage in a deal, you can be CF positive you just need to leave more cash in the deal and it's worth it for a better property.

Completely different way of looking at things and you're going to be forced to evaluate like this in a new higher rate era plus housing scarcity. Better is better, less is more. 

Yep, adding a bathroom doesn't really add much value or rent for that fact to a sub $100,000 property.

Maybe slightly.

10 years ago they where giving away empty lot's just not to pay annual property taxes on them.

Nowadays they are listed for between $5,000 - $10,000 but still worthless in my opinion.

Thanks 

[Engelo Rumora]

Quote from @Jay Hinrichs:

Quote from @Marcus Auerbach:

Quote from @Engelo Rumora:

Quote from @Marcus Auerbach:

Agree with @James Hamling. I think we are starting to see a theme here: C and D look better on paper than reality and ar easy to buy (for a reason, I might add). I've done BRRRRs in Milwaukee for almost 15 years, but things have changed around 2020: I have a hard time buying quality properties where I get a discount that even matches rehab cost. 

So, we buy basically move-in ready and let the market do the appreciation instead of me 6 months full rehab. Much easier. Everything that I bought recently needed 30% down to get to a 1.2 DSCR even with relatively high rents between $1,850 and $2,650. Rented in a week or two, quality tenants, typically previous homeowners who appreciate a nice house, keep it immaculate and take great care of the yard.

I'd rather have one of those than 10 "cash flow" properties in the hood.

Hi Marcus,

There are many ways to skin a cat per se lol

Personally, I'd rather have volume and 10 "in da hood" where the numbers don't lie and where I know what I'm doing.

Then buying using a tonne of leverage and hoping the market will appreciate.

"Hoping" for me was never a strategy as the future is unpredictable.

I hoped my $480,000 condo in Chicago would appreciate and it didn't move since 2018.

My tenant a crypto exec has been paying me $3,000 in rent on the 28th of each month like clockwork for 5 years now.

No capex, no issues at all and that has been a breeze.

3% ROI isn't sexy enough to me tho 🤷‍♂️

I'd probably be cheering right now if it moved up in value but it's been a dead deal in my eyes.

But it is what it is.

The numbers in a deal TODAY per se don't rely on hope and are a more predictable outcome.

Granted, the numbers need to be "worked" and a more "hands on" approach is needed in such markets.

Thanks 

Hi Engelo, you have been doing this for a long time and I know you have the skills and tenacity to manage high-cash-flow properties, but you have to admit, you are working hard for your cash flow, this is not passive at all. And you are local! OOS is so much harder!

And there is also a hope component involved. You are taking a chance with every tenant and you hope they are not trashing your house and you don't have an eviction.

If your condo did not appreciate it over the last 6 (unicorn!!) years, I would definitely sell it pretty soon, because if/when the market weakens it will probably start losing value. I think you want both, cash flow and appreciation, that is the sweet spot. Especially in Milwaukee.

And I would argue that average appreciation over long periods of time, have not much to do with hope. I am basically shorting the US-dollar. And all currencies will eventually go to zero, Warren Buffet was not the first one to say this.

Once I understood this, I started looking at leverage in a totally different way. We are only very moderately leveraged, but I am in no rush to change that and rather use the cash flow to re-invest either into upgrades (we are doing a ton of driveways this year) or more RE.

I don't think there is a right or wrong way, like you said there are many different ways, I just find myself adjusting every year a bit more in that direction.

most condos historically are not great appreciation plays. its a place to live and enjoy.. unless said condo was bought in Miami in 2008 to 2010 :)

No $#@% mate.

And Chicago has been a disaster for many years now.

I pinged Bri about it a while ago and she said "Good luck" haha

I guess it's more a trophy property than anything else during my "ego" pumping days.

A bit older, balder and smarter nowadays I guess.

Less is more mate lol

[Karan Singh]

Quote from @Eric Gerakos:

Quote from @Luka Jozic:

Quote from @Jay Hinrichs:

Quote from @Luka Jozic:

Quote from @Bob Stevens:

Quote from @Luka Jozic:

Hi everyone, I started investing in Cleveland about a year and a half ago and have acquired 6 LTRs (SFH and MFH) using mainly the BRRRR method in C areas. I've done fairly big renovations where in most cases, Im replacing almost everything in/on the house. First year has been tons of learning and despite all the research and preparation I did, I still did mistakes and learned things the hard way. I went with one of the biggest PMs that everybody vouched for, yet it took them forever to even place a tenant, and once they did, the tenants never paid on time. Additionally, despite the houses being newly renovated, every month there were new expenses and something breaking, almost as if they want me to not cashflow. The PM said they don't up-charge, but most repairs and expenses were ridiculously high. The result of this? No cashflow, in fact Im in the negative for almost every property so far, and yes I do put aside money for vacancies, capex, and repairs. I finally switched PMs recently and the new one seems much better but Im still getting pretty frequent repairs though much cheaper than the previous PM. The problem is that in this market, getting $2-300 a month cashflow is about as good as it gets, and one furnace, one turnover or whatever and that takes out the cashflow for that year, or even puts you in the negative.

Lets just say the experience hasn't been great, yet. Im trying to stay hopeful that it will turn around but I just keep receiving blow after blow. Just recently got hit with a 10K sewer line repair. I know, its my fault I didn't inspect the sewer line but in my defense, having such inspection contingencies makes it nearly impossible to find a viable BRRRR deal, as there are several investors lined up ready to pay more, in cash, and no contingencies. Im now starting to doubt wether or not Cleveland is actually a good market to invest in? Majority of the houses are old and require frequent repairs in addition to a poor tenant base that can't pay on time and don't care about their credit. On paper it looks good, but the reality is a different story. Im wondering if other markets might be better, with somewhat newer houses and higher quality tenants? But the thing with those markets are you'd be happy to break even, so even if repairs are less and tenant quality is better, I feel like it would end up being the same result.

For those of you that invest in Cleveland, do you have similar experiences? If not, what do you think you might be doing differently to make it work better?

' 

 I TRIED to help you but you " know better". I get on avg 800 per month NET income 15- 20% NET (based on cash purchases) on SF, and more on my duplex's. My maintenance is little to nothing as we do the reno correctly. I also tried to help you with PM I'm aware of them all 99% are terrible and will charge you 3k to replace a furnace when the real cost is about 1600. I just got $900 for a 1 br in East Cleveland. I'm going to get 1500 for a 3 br in Lee Harvard, fully renovated all in 75k, do the math :) 

All the best 

Im not interested in buying turnkey and also not buying cash, I would run out of money real quick. I need to be doing BRRRR thats the only way to scale somewhat fast. Im glad you're doing good.

but if your negative cash flow your bleeding your money anyways.. instead of buying a property in a better local that is rehabbed better than you can do. And actually being cash positive instead of negative at least your post says your cash negative not making any money so you are eroding your cash by feeding these.. not to mention the incredible risk you take with remote rehab and the time involved .. If your paying cash to buy and rehab then refinancing I get that.. but your still paying for two closing costs. And if you finance the buy then you have money there.. just some things to think about.

Thats fair but Im assuming there is a little bit of a learning curve before you get it right? If I buy turnkey, Im putting 25% down on any property, which is like 30-45K in Cleveland, and Im still at risk of running into issues because we all know that most turnkey properties aren't actually turnkey, they're lipstick on a pig. Im more interested to learn what I can maybe change or improve to make BRRRR strategy work, not change strategy completely where I can buy maybe 1 property a year instead of 3-4. 

You’re right. Keep your focus on how many crappy properties you can buy each year, instead of buying fewer but better properties. Focus on “scaling quickly.” Collect properties instead of money. It’s a winning strategy…..

 This type of tone and condensing answer is unnecessary. The guy is already losing a lot of money and asking for help. He's been fairly polite in his questions/answers, so if you don't have anything useful to say then perhaps not say anything at all. 

[Karan Singh]

Quote from @Luka Jozic:

Quote from @Becca F.:

@Luka Jozic

Thanks for sharing your experience. I didn't buy in Cleveland but bought in Indianapolis Class C in 2023. I've had similar experiences with a SFH I've owned for a year, repairs called in 7 times out of 9 months.

 I'm not buying anymore Class C properties in Indianapolis or anywhere. I put in 3% for appreciation (which is typical for Indy outside of 2018-2022) and 4% rent increases. I don't know anything about Cleveland. What did you put in for appreciation and rent increases per year when you ran your numbers? 

If I were you, I would pause and re-evaluate and not put any offers on Class C properties anymore, especially OOS. I think it's better to have fewer high quality properties than lots of inexpensive ones (all those cap ex, repairs, tenants, PM fees). Could selling off those properties and buying one or two properties in appreciating areas be an option?  What about buying near where you live?

Im sorry to hear that, I did consider Indianapolis as well. I don't really consider appreciation as I consider it just a bonus, especially in a cashflow market.

I am definitely going to pause and stabilize before I continue. Majority of my issues were with my prior PM and since switching it has been much better. Although I've still seen some unlucky major repairs, most of my houses are literally running out of things that could break. So like someone else said earlier, it might take 1-2 years for things to stabilize a little.

I live in Tampa so LTR just doesn't work here, some people do rent by room which could have its own issues, but at least this is a market with more qualified tenants where people actually want to live, so I'll consider it. As far as appreciation, and someone can correct me if Im wrong but looking at all the common markets over an 8 year span, its about the same for all of them. However, appreciation on a property in Tampa is of course more cash than a property in Cleveland, but also more to get into it. 

To be honest, many of us were influenced by the "cash flow" gurus/agents pushing properties in these areas, and now we're facing the consequences.

It's wise to pause and reassess. Walking away from a property after significant investment is tough, but beware of the sunk cost fallacy. Have you visited all your properties since purchasing them? It's crucial to evaluate each property's long-term viability in person. Develop a turnaround plan for each one and commit to it. Avoid relying on things like hoping that the Fed will lower rates to boost prices—this isn't investing; it's speculative hoping. Stick to your plan. You might need to accept losses on some properties, but sometimes that's the cost of learning.

I'm glad you found a better property manager. Another suggestion is to consider managing the worst properties yourself from out of state. This is more feasible today than ever before. To do this successfully, you'll need to find reliable and cost-effective contractors and tradespeople. This approach can help mitigate losses by increasing your margins. With enough properties, the savings could justify quarterly visits for inspections and lump-sum repairs.

Best of luck and I really hope things work out for you. 

[Eric Gerakos]

Quote from @Karan Singh:

Quote from @Eric Gerakos:

Quote from @Luka Jozic:

Quote from @Jay Hinrichs:

Quote from @Luka Jozic:

Quote from @Bob Stevens:

Quote from @Luka Jozic:

Hi everyone, I started investing in Cleveland about a year and a half ago and have acquired 6 LTRs (SFH and MFH) using mainly the BRRRR method in C areas. I've done fairly big renovations where in most cases, Im replacing almost everything in/on the house. First year has been tons of learning and despite all the research and preparation I did, I still did mistakes and learned things the hard way. I went with one of the biggest PMs that everybody vouched for, yet it took them forever to even place a tenant, and once they did, the tenants never paid on time. Additionally, despite the houses being newly renovated, every month there were new expenses and something breaking, almost as if they want me to not cashflow. The PM said they don't up-charge, but most repairs and expenses were ridiculously high. The result of this? No cashflow, in fact Im in the negative for almost every property so far, and yes I do put aside money for vacancies, capex, and repairs. I finally switched PMs recently and the new one seems much better but Im still getting pretty frequent repairs though much cheaper than the previous PM. The problem is that in this market, getting $2-300 a month cashflow is about as good as it gets, and one furnace, one turnover or whatever and that takes out the cashflow for that year, or even puts you in the negative.

Lets just say the experience hasn't been great, yet. Im trying to stay hopeful that it will turn around but I just keep receiving blow after blow. Just recently got hit with a 10K sewer line repair. I know, its my fault I didn't inspect the sewer line but in my defense, having such inspection contingencies makes it nearly impossible to find a viable BRRRR deal, as there are several investors lined up ready to pay more, in cash, and no contingencies. Im now starting to doubt wether or not Cleveland is actually a good market to invest in? Majority of the houses are old and require frequent repairs in addition to a poor tenant base that can't pay on time and don't care about their credit. On paper it looks good, but the reality is a different story. Im wondering if other markets might be better, with somewhat newer houses and higher quality tenants? But the thing with those markets are you'd be happy to break even, so even if repairs are less and tenant quality is better, I feel like it would end up being the same result.

For those of you that invest in Cleveland, do you have similar experiences? If not, what do you think you might be doing differently to make it work better?

' 

 I TRIED to help you but you " know better". I get on avg 800 per month NET income 15- 20% NET (based on cash purchases) on SF, and more on my duplex's. My maintenance is little to nothing as we do the reno correctly. I also tried to help you with PM I'm aware of them all 99% are terrible and will charge you 3k to replace a furnace when the real cost is about 1600. I just got $900 for a 1 br in East Cleveland. I'm going to get 1500 for a 3 br in Lee Harvard, fully renovated all in 75k, do the math :) 

All the best 

Im not interested in buying turnkey and also not buying cash, I would run out of money real quick. I need to be doing BRRRR thats the only way to scale somewhat fast. Im glad you're doing good.

but if your negative cash flow your bleeding your money anyways.. instead of buying a property in a better local that is rehabbed better than you can do. And actually being cash positive instead of negative at least your post says your cash negative not making any money so you are eroding your cash by feeding these.. not to mention the incredible risk you take with remote rehab and the time involved .. If your paying cash to buy and rehab then refinancing I get that.. but your still paying for two closing costs. And if you finance the buy then you have money there.. just some things to think about.

Thats fair but Im assuming there is a little bit of a learning curve before you get it right? If I buy turnkey, Im putting 25% down on any property, which is like 30-45K in Cleveland, and Im still at risk of running into issues because we all know that most turnkey properties aren't actually turnkey, they're lipstick on a pig. Im more interested to learn what I can maybe change or improve to make BRRRR strategy work, not change strategy completely where I can buy maybe 1 property a year instead of 3-4. 

You’re right. Keep your focus on how many crappy properties you can buy each year, instead of buying fewer but better properties. Focus on “scaling quickly.” Collect properties instead of money. It’s a winning strategy…..

 This type of tone and condensing answer is unnecessary. The guy is already losing a lot of money and asking for help. He's been fairly polite in his questions/answers, so if you don't have anything useful to say then perhaps not say anything at all. 

Thanks, I will try not to "condense" my responses in the future.

[V.G Jason]

Quote from @Karan Singh:

Quote from @Eric Gerakos:

Quote from @Luka Jozic:

Quote from @Jay Hinrichs:

Quote from @Luka Jozic:

Quote from @Bob Stevens:

Quote from @Luka Jozic:

Hi everyone, I started investing in Cleveland about a year and a half ago and have acquired 6 LTRs (SFH and MFH) using mainly the BRRRR method in C areas. I've done fairly big renovations where in most cases, Im replacing almost everything in/on the house. First year has been tons of learning and despite all the research and preparation I did, I still did mistakes and learned things the hard way. I went with one of the biggest PMs that everybody vouched for, yet it took them forever to even place a tenant, and once they did, the tenants never paid on time. Additionally, despite the houses being newly renovated, every month there were new expenses and something breaking, almost as if they want me to not cashflow. The PM said they don't up-charge, but most repairs and expenses were ridiculously high. The result of this? No cashflow, in fact Im in the negative for almost every property so far, and yes I do put aside money for vacancies, capex, and repairs. I finally switched PMs recently and the new one seems much better but Im still getting pretty frequent repairs though much cheaper than the previous PM. The problem is that in this market, getting $2-300 a month cashflow is about as good as it gets, and one furnace, one turnover or whatever and that takes out the cashflow for that year, or even puts you in the negative.

Lets just say the experience hasn't been great, yet. Im trying to stay hopeful that it will turn around but I just keep receiving blow after blow. Just recently got hit with a 10K sewer line repair. I know, its my fault I didn't inspect the sewer line but in my defense, having such inspection contingencies makes it nearly impossible to find a viable BRRRR deal, as there are several investors lined up ready to pay more, in cash, and no contingencies. Im now starting to doubt wether or not Cleveland is actually a good market to invest in? Majority of the houses are old and require frequent repairs in addition to a poor tenant base that can't pay on time and don't care about their credit. On paper it looks good, but the reality is a different story. Im wondering if other markets might be better, with somewhat newer houses and higher quality tenants? But the thing with those markets are you'd be happy to break even, so even if repairs are less and tenant quality is better, I feel like it would end up being the same result.

For those of you that invest in Cleveland, do you have similar experiences? If not, what do you think you might be doing differently to make it work better?

' 

 I TRIED to help you but you " know better". I get on avg 800 per month NET income 15- 20% NET (based on cash purchases) on SF, and more on my duplex's. My maintenance is little to nothing as we do the reno correctly. I also tried to help you with PM I'm aware of them all 99% are terrible and will charge you 3k to replace a furnace when the real cost is about 1600. I just got $900 for a 1 br in East Cleveland. I'm going to get 1500 for a 3 br in Lee Harvard, fully renovated all in 75k, do the math :) 

All the best 

Im not interested in buying turnkey and also not buying cash, I would run out of money real quick. I need to be doing BRRRR thats the only way to scale somewhat fast. Im glad you're doing good.

but if your negative cash flow your bleeding your money anyways.. instead of buying a property in a better local that is rehabbed better than you can do. And actually being cash positive instead of negative at least your post says your cash negative not making any money so you are eroding your cash by feeding these.. not to mention the incredible risk you take with remote rehab and the time involved .. If your paying cash to buy and rehab then refinancing I get that.. but your still paying for two closing costs. And if you finance the buy then you have money there.. just some things to think about.

Thats fair but Im assuming there is a little bit of a learning curve before you get it right? If I buy turnkey, Im putting 25% down on any property, which is like 30-45K in Cleveland, and Im still at risk of running into issues because we all know that most turnkey properties aren't actually turnkey, they're lipstick on a pig. Im more interested to learn what I can maybe change or improve to make BRRRR strategy work, not change strategy completely where I can buy maybe 1 property a year instead of 3-4. 

You’re right. Keep your focus on how many crappy properties you can buy each year, instead of buying fewer but better properties. Focus on “scaling quickly.” Collect properties instead of money. It’s a winning strategy…..

 This type of tone and condensing answer is unnecessary. The guy is already losing a lot of money and asking for help. He's been fairly polite in his questions/answers, so if you don't have anything useful to say then perhaps not say anything at all. 

 Fitting for a Karan response. Erick is right, being right or wrong doesn't have a tone. You should take a page out of your own book and appreciate when some of the smartest, most successful people in the world give you advice you could never tangibly afford on your own. It's up to you take it.

[Jim K.]

Before the fur starts flying, can I at least make one simple statement about this situation? To live multiple states away and run a string of successful C-class long-distance BRRRRs anywhere in the Rust Belt is practically impossible. I think the OP is lucky not to have experienced catastrophic failure yet. This was taking on suicidal risk to begin with, and it's just going to get worse. I'm actuallu surprised and I'm sure there are volumes left unspoken here by the OP about how hard it must have been to make it this far. I only hope my own posts recounting what my hyperlocal experiences have been like here in Pittsburgh, the self-styled "Paris of Appalachia," do not in any way encourage people to follow the OP's lead. There's an omnipresent, ubiquitous brutality to life in general and running rental real estate in  prticular here that just doesn't translate well into metrics and data.

[Luka Jozic]

Quote from @Jim K.:

Before the fur starts flying, can I at least make one simple statement about this situation? To live multiple states away and run a string of successful C-class long-distance BRRRRs anywhere in the Rust Belt is practically impossible. I think the OP is lucky not to have experienced catastrophic failure yet. This was taking on suicidal risk to begin with, and it's just going to get worse. I'm actuallu surprised and I'm sure there are volumes left unspoken here by the OP about how hard it must have been to make it this far. I only hope my own posts recounting what my hyperlocal experiences have been like here in Pittsburgh, the self-styled "Paris of Appalachia," do not in any way encourage people to follow the OP's lead. There's an omnipresent, ubiquitous brutality to life in general and running rental real estate in  prticular here that just doesn't translate well into metrics and data.

 Don't agree one bit with that statement and Im getting a feeling that most people in this thread are inflating the struggles I've been facing. First of all I said Im negative on most, not all. The ones Im negative on, two of them weren't even BRRRRs, I was negative because my old PM was robbing me and on the other cause I got greedy and agreed on unqualified tenants at higher than market rent that I had to evict after 3 months. The two BRRRRs that are negative is one because of the sewer (could and should have done a sewer inspection) and the other one is negative cause my old PM couldn't find a tenant for the second unit in over 3 months (my new PM filled it in 1 week and no issues ever since).

Would it have been better if I was there? Absolutely. Has my contractors and my old PM ripped me off on certain things that I can't verify due to being OOS, 100%. But thats part of the being OOS and as I gain more experience and I better team I can minimize that. I definitely don't think its gonna get worse from here I think the complete opposite. Yes I was expecting cash flow to be more stable from the beginning but I guess it takes a little bit of time. I haven't left more than 5-15K in ANY on my properties and have created a lot of equity in all of them except Toledo. And in terms of appreciation, according to Zillow data over a 8 year span, its been about the same for almost every market. 

[Luka Jozic]

Quote from @Scott Bowen:

@Luka Jozic BRRRR is still a good strategy - don't let anyone tell you otherwise. But gone are the days where you can expect to pull all your money out of the deal and still cash flow $200+ a month. I aim for 10-20% CoC on BRRRR deals.

Cleveland wouldn't be my market of choice given how old most of the houses are, but I know a lot of investors who have success there, so it's definitely viable. For C/C- neighborhoods you usually need to scale to 10+ doors; it's a numbers game. 

Yeah my goal is around 30% but its hard to achieve, especially using a hard money loan. If I could start finding off market deals myself I think it could work, usually the assignment fee from wholesalers is the difference between pulling all your money out and not. 

[Jim K.]

Quote from @Luka Jozic:

Would it have been better if I was there? Absolutely. Has my contractors and my old PM ripped me off on certain things that I can't verify due to being OOS, 100%. But thats part of the being OOS and as I gain more experience and I better team I can minimize that. I definitely don't think its gonna get worse from here I think the complete opposite. Yes I was expecting cash flow to be more stable from the beginning but I guess it takes a little bit of time. I haven't left more than 5-15K in ANY on my properties and have created a lot of equity in all of them except Toledo. And in terms of appreciation, according to Zillow data over a 8 year span, its been about the same for almost every market. 

 Luka, I could not hope more for you that you are right and I am dead wrong here.

[Michael P.]

Its not to late to do sewer inspection on the other properties if they were never done. Prevent sewage leaking and destabilizing the foundation. Blow in a resin-coated lining through the old pipe for $150 per linear foot. Better than 35k repair for sinking foundation.