All Forum Posts by: Mohamed F.

I agree, it has a lower cost barrier to entry than a lot of other cities, but gets really good rents so cash flow has been a large driver for real estate investors to this area.  But I have investors that bought properties with me pre 2020 and their properties have all gone up in value 30-40% so you never really know what external factors can positively or negatively affect each market.

But even though prices have slightly gone up in this area, there are still a lot of good deals to be had, depending on what types of properties you're looking for and the type of neighborhood you're looking to invest in.  

But what a lot of people don't talk about when discussing the Cleveland real estate market is how much they're building up the downtown Cleveland and University Circle areas.  This is going to keep bringing in more good paying jobs to this area, and will bring more renters who want to live close to downtown and are willing to pay higher rents.  

Also, the medical infrastructure in Cleveland is booming and large hospital systems like the Cleveland Clinic and Metro are pouring billions of dollars into this area and creating tons of great jobs.

Quote from @Mohamed F.:

Quote from @Bob Stevens:

Quote from @Dominic Richardson:

Does anyone here invest in Cleveland Ohio? Looks like houses are fairly inexpensive. Is there a reason why? 

 I have been for the last 10 or so years. You can get 10% or better net caps based on cash purchases. I just got 1700 for a 4 br, all in 75k. Closing on another this week will do the same. 

Bob, did you have to make initial repairs? And was it vacant?

 Yes vacant and yes of course repairs, 

I own 7 properties (8 doors) in southwest Pennsylvania free and clear.  I cash flow about 7k a month after expenses.  These are in C locations but my places are on the nicer end of what is available in those locations and my rent is also on the high end.  Haven't had any problems with tenants yet.  I have about 800K of untapped equity.  These places will not have a lot of appreciation.  

I am considering cashing out 3-4 of these properties and using those funds as the down payment on homes in better location - B/A-.  This will better diversify my portfolio and let me add some places that should appreciate nicely.  If I cash out three of them, I can get six other places.  Unfortunately, this will actually bring my cash flow DOWN due to the interest rates.  Take equity out of one property will cost me about 1K a month and with the mortgages on the new purchases, I will probably only cash flow 200-300 per home.  So if I refi three and buy six more - than I lose about 3K in cash flow and only add 2400 in cash flow from the newer places.  This will get better once interest rates come down and I can refi.  

What would you do?

Quote from @Tim Ryan:

If he cashes out the equity, he's borrowing money at 7% or higher so that he can invest in real estate with loans at 7% or higher. How does that make sense? 

EXAMPLE
You cash out $100,000 of your equity and use this as a down payment on a $400,000 investment property. This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).

Key Numbers

• Home Equity Loan Interest Rate: 6%
• Mortgage Interest Rate: 7%
• Rental Income: $3,000 per month
• Expenses (management, taxes, insurance, maintenance): $800 per month

Income and Expenses

• Monthly Rental Income: $3,000
• Monthly Expenses: $800
• Monthly Mortgage Payment: $2,000

Explanation

• The investor earns $3,000 in rent each month.
• They pay $2,000 on the investment property mortgage and $800 on other expenses.
• This leaves $200 profit each month or $2,400 per year.
• However, you have to pay $6,000 interest on the equity borrowed.
• This leaves you with an annual loss of $3,600.

This example shows that while the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss. The investor must consider whether the potential property value increase or other benefits outweigh this loss.