All Forum Posts by: Timothy Murphy III

@David Lauka

There's been some buzz about revitalization efforts there. My opinion is that there's as low end areas go in the Cleveland area, there are others that would be preferable.

@Jason Lewandowski

Welcome to BP.

Seconded to North Coast Commercial Group. Just did a deal funded with them and they were easy to work with.

@Eric Bergey

Welcome to BP. Best of luck with whichever strategy you ultimately choose to implement.

@Saeid Safarmehdi

Welcome to BP. Feel free to reach out to me with questions about the Cleveland market.

I keep hearing people talk about Slavic Village revitalization. And while there are significant efforts being made there, I agree with @Steven Aviram, I think that North Collinwood, Superior-St Clair, and Goodrich-Kirtland Park (often referred to as "Asiatown") are all better areas for that sort of speculation.

@Andrea Hauserman

@Eddie T. brings up a very good point about undiscovered liabilities. When you buy an individual asset, you know what you're getting. When you buy an existing business, you don't know what might be hidden in there. The seller and current owner often may not know about litigation that's about to be filed against them as well, so it's not simply a matter of disclosure. In most cases, best practices when a buyer is buying an existing business is to structure it as the sale of specific assets into a new business entity with a carefully crafted asset purchase agreement so the buyer can avoid accidentally assuming unwanted liabilities of the predecessor.

The points about avoiding some conveyance fees and tax reassessments also have merit, but in my opinion they aren't as significant as making sure to avoid undiscovered liabilities. In some cases, there's ways to structure the transaction where the current company forms new subsidiaries that are free of undisclosed liabilities, transfers the real estate into the new subsidiaries (exempt from conveyance taxes and tax reassessments), and then the fresh subsidiary is transferred to the end buyer. This sort of creativity in the deal structure can be appropriate for larger transactions involving more expensive commercial property, but may not be cost effective for individual houses because you need to hire professionals to design and carry out the transaction.

@Aaron James Stingis

IMO it's mostly B class with some C class, depending on where exactly you are. It should perform very similarly, from an investor's perspective, as several other east side suburbs like South Euclid, Euclid, Cleveland Heights, etc. You're only a short drive away from Streetsboro, I'd recommend driving past any property you're considering as well as the surrounding areas to get a better feel for what type of neighborhood you're in.

@Laura Janosko

That doesn't sound right to me, though it may make it trickier to find comparable properties. I'd talk to a few other banks.

Most investors use a letter grade rating scale from A-F to describe various areas and neighborhoods. Keep in mind these are subjective, so they're meaningless without calibrating your scale.

A fairly typical letter grading scale for the NE Ohio area would be something like this.

A - Higher end and expensive areas. Mostly owner occupied homes and those that do rent are typically higher income earning professionals.

B - Stable suburban areas. Working class to upper middle type tenants.

C - Better areas within city limits or lower end parts of inner ring suburbs. Mostly working class.

D - Inner city areas. Tenant base tends to be low income. Lots of public assistance, social Security and disability income.

F - Warzones.

The higher on the scale you go, the less risky your investment will be, but the cash flow lower returns. Higher end areas tend to do better for appreciation as well. Lower end areas have additional risks and challenges but also have the potential for much higher cash flow, as the acquisition prices are dramatically cheaper but the monthly rents aren't proportionally cheaper. In my experience, most investors tend to target B or C caliber areas in effort to strike a decent balance between risk, cash flow, and potential future appreciation, but there are investors that operate in each of these asset classes.