All Forum Posts by: James Maradits

Hi Ryan!  Welcome to BP.

I think you will have success in any of these markets as long as you do you due diligence and work to put together a solid team.  As with most of the country currently, we're experiencing a seller's market (low inventory) and rapid appreciation in all of these popular midwest cities which is making it slightly harder to find deals--but still possible.  

The city of Cleveland is smaller than Columbus or Indianapolis, but all of these MSAs are relatively close in size.  The property taxes in Indiana are typically lower than they are in Ohio which is nice, but the home prices in much of the Cleveland market are a bit lower so this may prove to be an easier entry point for you.  I'm sure the Columbus experts will chime in shortly to provide their opinions.

Best of luck to you, and feel free to send me a message with any questions I may be able to help with.

Varun,

Unfortunately there isn't a one size fits all answer for this.  Your operating expenses will vary greatly based on quite a few factors.  Location, property type (single vs multi, older vs newer, etc), and management will all need to be taken into consideration.

"A" class properties will generally be less expensive to operate than "B" class properties, "B" than "C" and so on..

Properties that have been well maintained or preemptively updated with modern plumbing, appliances, etc will be less expensive to operate due to less maintenance issues occurring.

Single family will generally have less operating expenses due to tenants typically being responsible for all utilities, landscaping, etc, opposed to multifamily which often times has shared water (or other utilities) and perhaps some landlord paid expenses to maintain landscaping or common areas.  In my experience in the market, my single family tenants generally tend to stay longer terms than multifamily tenants.

Management will be a big expense if you're not self managing.  It's safe to assume a property manager will take roughly 10% of the gross rent each month, and charge 1 month's rent to place a tenant.  If you have a turnover every year management alone will have you effectively only operating off of 9-10 month's rent after they take their fees.

Like @Brandon Sturgill mentioned, it would be a good idea to run numbers at various levels to check for worst case scenario outcomes and make sure that the numbers work at different levels.

It's impossible to say with 100% certainty.  Generally speaking, if the property is stabilized and performing well, they will typically have a lease and maybe even a ledger.  If there are no leases or any type of documentation in place it's fair to assume that there is a problem with the property's current performance and management.

Friendly advice, take the release and get out of this deal. It sounds like there is a lot of uncertainty and problems going on and that address is in a distressed area which will most likely continue to be problematic for you without having a proper team in place to help.  Treat this as a learning experience and move on.

But to your question, the vast majority of small time landlords aren't going to be able to provide accurate records for small properties like this.  It's easy enough to estimate expenses, rents, etc when there are only 1-4 units in question.

Between this and your other recent discussions, it definitely sounds like you did not chose the right agent to work with on this deal.  I would be more careful moving forward to ensure that you find someone familiar with dealing with investment properties like this one.

It's fairly common to take on an occupied property without leases in place and often times it can be an opportunity.  When doing this, it's extremely important to verify that there are in fact no leases in place to protect yourself against the event of a tenant actually having a lease with terms that were not accurately stated (example: if the seller says the tenant is paying $1000 a month but they actually have a lease for the next 10 years at $500/month that you would be stuck with).

It's probably a good idea to assume/budget that you will make no profit the first 3-6 months of ownership until the property is stabilized (repaired, rented, whatever you need to do).  This might not be the case, but it would be better to prepare for the worst rather than put yourself into a risky situation.

It won't be feasible to convert to a unit in our climate and with the extensive amount of money it would take to run plumbing and power to the garage.  I don't think the city would even allow it, but if they did I would estimate that you'd be looking at somewhere upward of $50k or more to make it happen.

A lot of Lakewood doubles have an attic that can be finished, this would probably be a more cost effective and profitable route in terms of adding additional living space.

You can try to rent the garage as a garage, but I can't see anyone other than the tenants wanting to rent a garage space in a residential area unless they live at the property.  I would just include the garage as an amenity for the tenants and build that into your rent price.

I'd recommend contacting @Aaron Westerburg of Inspection Tech.

I've flipped a few houses over there.  It is improving, but there are a few streets over there that definitely have a ways to go in terms of a lot of run down property and other things that make the neighborhood less appealing.  I would also recommend getting a pest inspection in that area, I've personally seen a lot of properties in a one or two block radius over there that have cockroaches/bed bugs.

If it helps feel free to shoot me a PM to discuss further!

 ReafCo in the house! My favorite Columbus shill crew.

Just curious, what is your basis for the assumption that there are "more headaches" in Cleveland?  Have you ever been to Cleveland?  Have you ever done a deal in Cleveland? How does one quantify headaches, particularly in a market they are not truly familiar with?