All Forum Posts by: Christian Carson

Originally posted by Will Spruill:

How is a duplex for $45k and $1k monthly rent too low. In my area (Seattle) to get $1k rent, you're in for $100k plus. This is a good deal all day long.

I've never been to Seattle, but there's something about most west coast properties that makes them the subject of a lot of land speculation. The numbers won't compare to here because all the speculators went bankrupt years ago!

The problem with operating in the ghetto is that your house can get vandalized and stripped with less than a week's worth of vacancy. If your property manager is not vigilant (and I almost guarantee he won't be unless you have found someone that I haven't!) then a lot of damage can happen after a tenant moves out without notice. Sometimes tenants like to take appliances and fixtures with them, and I've even seen them take aluminum windows. This is a little bit too much risk for me.

As for the numbers, they are good so long as you don't have to deal with the above. I've been buying with numbers better than those in far better neighborhoods. (Most recent purchase was $38k with $1200 gross) If you are less sensitive about these risks, there are fourplexes in Buckeye-Shaker that will deliver a 25% cap rate.

To be honest, those numbers are way too low for me to buy in that neighborhood. I suppose Google street view could make one less sensitive to neighborhood conditions, but I think any local would probably consider anything around Coit Road to be deep ghetto.

Will,
Our investment group holds rentals on the east side. This is a very strong rental market, but it definitely requires a ton of market research. There are strong neighborhoods and ghettos, and in some more questionable areas it can go street-by-street. For example, one of our duplexes is on a very nice street, but the street to the south has at least 5 board-ups and is in terrible condition. (We bought it to speculate on neighborhood gentrification.)

It's a great time to buy in Cleveland right now--the business climate has turned around 100% and there's about $4bn in construction activity going on downtown right now. Some inner-city neighborhoods have seen 400%+ price appreciation in the last ten years. Again, though, some neighborhoods are much better than others, and I would definitely plan to check out prospective properties in person.

Mehran Kamari, after doing some comps on this street and this neighborhood and talking to some agents, we came up with $50k as the low end ARV. We might have been able to get more, but due to the nature of the street (large old apartment complex at the end) and the lack of a garage, we decided it would be far easier to rent.

Originally posted by Landon Dolezal:

As an investor are Forclosed and Bank owned homes a likely place to get good deals?

It depends on where you are and what kind of deals you're looking to make. A bad location can make a great rental but would turn retail buyers off. In my area, the cities make you put up escrow money for repairs, so that gives me a pretty good niche market.

If you're looking for a direction, do a lot of spitballing and kicking around ideas for making money, run the numbers, and then try something out. Some paths are more profitable than others.

Thanks for all the quick replies! Great points. I think we'll just demo it at the outset. It's really too close to the neighbor's and there isn't enough "patio" space to justify it. The previous owner must have really liked charcoal grilling!

My partners and I just closed on a new house for flipping. We think the ARV is going to be about 100-120k.

It has a brick/mortar outdoor barbeque and sink with hard plumbing (hot and cold maybe???). Its in the backyard between the garage and the neighbor's. It's old and needs some help.

I attached some photos (sorry about the quality). What do you guys think--keep it or chuck it? If keep, does anyone know where we can get some new fixtures for it?

I don't have a problem with demolishing it, but I figure that it might add some value if we fix it up. Let me know what you guys think!

https://plus.google.com/photos/113469214269245432894/albums/5860802361776049761

Originally posted by Adam Craig:

I also know that prices are low in Cleveland but where is the demand EVER going to come from?

Cleve metro population has been largely flat for years, not massively declining as we're led to believe. As housing units deteriorate and people move in and out, demand is created.

The rent-to-purchase price ratio is one of the most favorable in the country, and you and I can probably drive down a street anywhere in the city and be able to ballpark a rent price with reasonable accuracy. Many posters here tell us to stick to the markets we know.

I don't mean to disparage investors in those areas, but a few guys in the cigar shop here in Chagrin bought a couple of rental properties in Phoenix in 2000-2005 with exactly the same expectation. (The rest is history.)

There is no free lunch. Sometimes there are huge steals to be had, but no one is going to convince me that I can just write a check, stick it in the mail, and get a risk-free 30% ROI. This kind of return calls for doing a massive amount of homework.

Originally posted by Ali Boone:

I keep hearing Cleveland in my head as being the next Detroit, at which point I wouldn't invest personally. But I could be wrong on that one.

Ali Boone, most of the time, the best opportunity is found where the masses fear to tread. Detroit lived and died on the auto industry, which is what we're seeing in the news today. The contrast: Cleveland has the dubious historical honor of being one of the first financial and medical epicenters of the country outside of NYC, which is a tradition that it holds onto today with headquarters of several major banks, Big Four accounting (E&Y), insurance (Progressive), and medical (Cleveland Clinic), among others. Two local real estate companies are responsible for developing many recent NYC skyscrapers (FCR & DDR). These are conditions that don't evaporate overnight (and in fact are fast on the up-and-up today). Lots of major deals are made here, for reasons I won't get into in this post.

I'm writing this poolside in Palm Springs right now--I understand why west coasters don't see the draw, but for the average middle-aged professional, Cleveland offers nearly every amenity of east coast living without the cost and headache. Of course, it isn't in the same league as California living :)

John Ellis: Lake County is a great suggestion. I am seeing a lot of Willoughby and Mentor-on-the-Lake foreclosures popping up on my MLS and I kind of want to buy one just for fun.

Forgot to mention: University Heights has a point-of-sale inspection requirement and escrow requirements for violation repairs. The city inspector gives you a list of violations and you have to obtain a contractor estimate for the repairs before depositing that amount as escrow. If it's $90k, it had better be offered violation-free. If they haven't passed the POS inspection yet, be aware it could take months to remedy.