All Forum Posts by: Don Petrasek

Statistics can be indicators of market strength.....but I've seen a few people quote stats on BP that just don't align with what's actually happening in the Cleveland market.  Not suggesting that the numbers aren't correct or factual, just that you have to look at a number of factors before investing.

Here's my current experience in the Cleveland and surrounding (west side) area:

April 2016:  rented upper unit of two-family in Lakewood in 2 weeks to tenant who could easily purchase it if she chose to.   40+ inquiries

December-January:  over 60 inquiries on 3/4 bedroom single family in Cleveland B-C neighborhood.  About 1/2 immediately screened out as no-go's (e g history of evictions, not enough income) but the remainder were strong (typical for B/C area in Winter).  ended up with an older couple, flawless history, 15+ years at last rental -only moving because it was sold

January- February:  closed on a flip in Fairview Park at beginning of January.  based on market activity in last 30 days, my list price is going to be at least 5% higher than I was thinking when I bought it.  multiple homes going under contract in less than 10 days in the middle of winter in this city.  some that don't look that great going under contract. 

There are some areas in Cleveland that I'd for sure tell out of state investors to stay away from (and new local investors as well) but in general the market is strong here and there seems to be more activity than we've had in quite a while.

@Account Closed  I have a two family on the east side of Lakewood that's smaller than standard size (only about 800 sq ft per unit) and I got $695 for the upper unit when it was vacant about a year ago....and I think I could have got $725 judging on the level of interest (rented in 2 weeks).   In light of that $650 seems reasonable if your units are updated, clean and frankly somewhere you'd live without thinking twice about it.  Don't underestimate the impact of that - I get a lot of prospective tenants who tell me that the other places they've looked at - sometimes at higher $ - haven't even been cleaned, let alone updated.  You can often get an edge in the rental market but just doing a thorough cleaning + a little painting.  I try to update 1 or 2 small things every time I get a unit back.  Doesn't cost much and seems to make a big difference.

@Daryl Anderson if your property is on the west side PM me, I've got someone I can refer.

@Brad Fausett  Haven't been involved with Sec 8 tenants for probably 5 years now, so maybe things have changed but in Cleveland rents are set by CMHA and they were market or slightly lower for the houses we had (44111 zip code).  And we could never figure out how they calculated rents (asked one of the counselors once and she had no idea either).   Seemed as though in the past they were above market but something changed here.

We had annual inspections which as Kevin noted were actually a good thing in terms of keeping the property up- tenants knew if the inspection failed, they might be out so we actually had one who was painting and doing other minor repairs herself to make sure the house was ready.   Inspections were hit or miss.....ranged from a 2 minute run thru to a house inspector like tour.   Overall inspections were pretty fair and we never got hit for anything unexpected.

I think they will also make you go to a landlord class to be involved in the program which is no big deal - was just a Sat morning I think.

Overall it worked OK for us in Cleveland, we got out because we wanted to be more in control of rents. 

@Barry Wittine sent you a PM

@Barry Wittine  where is the property located?  I have a contractor who works west side of Cleveland and sometimes near East (Cleveland Hts, Shaker Hts)

@Joe Coyne  make sure you completely understand market rents and how the property you are considering fits into the market before you make your offer.  Example, I just saw a property that was advertised as below market rents that appears to be located about 40 yards away from active railroad tracks....rents are lower than overall market probably to compensate for that factor & there may be only very limited potential to increase them. 

If you have open units this time of year, my experience is that you have to take a 5%-10% hit on rent rate to fill them due to increased supply.  That goes away in March/April.  So factor timing into rent increases as well.  

have you thought about offering to pay for materials directly instead and then working out a draw schedule that is timed to quickly cover payments to subs and any payroll he has?That's what upfront $ should be covering - and by the way I agree with your view that contractors shouldn't really be expected to front large sums of $.

  You're probably OK based on the due diligence you've done but fronting $70k to any contractor- even one that I've worked with a lot would make me a bit nervous.  Not so much because of the risk of losing the $ - more so because you've lost your leverage to get the GC moving and keep the early stages of the project in motion.   If I'm him and have to choose between getting your project started with $70k in my pocket already and going to the other that's 3-4 days of work away from getting my next payment, guess where I'm going tomorrow?

With the majority of my new tenants I get the security deposit as soon as they accept my offer to rent them the house and refer to it as a holding deposit.  They then have until a certain date to pay 1st months rent or I keep the holding deposit as compensation for taking the house off the market. If they come up with rent, it turns into the security deposit (and they get the keys)  havent kept a deposit yet.  And I do give people the option of waiting until they have both deposit & 1st month rent to get keys - but then they are taking the chance that I'll rent it to someone else who comes up with cash faster.  That's what you might do with your prospects-tell them you're happy to rent them the property but it stays available until you have all $ from someone.  I've done this a few times too and it's amazing at how quickly things change & they can suddenly come up with the cash.  

@Vernon Gray welcome. What part of the city are you in?