All Forum Posts by: Tal Tamir

Hi Everyone,

I'm a new investor from the Bay Area and I'm looking to start buying out of state rental properties and building a portfolio. I have never done a BRRRR, a flip, or owned any real estate before, but as an Architect I've been around this industry for a while and I want to begin investing. I would like to be able to invest in my own market, but the Bay Area is too expensive for me at the moment. What I'm looking to do is BRRRR in less expensive markets like Memphis, Kansas City, San Antonio, Cleveland, Houston, or Detroit.

The deal I would want to find is something around $100,000 that I can use a hard money loan to purchase and rehab, rent using a property manager, and refinance remotely from California. I know this will take a significant amount of effort and coordination, but hoping to connect with people on these forums and see what we can do. I'm interested in speaking with any lenders, agents, contractors, property managers, or anybody who simply knows the market well enough to give some good advice. 

My next step is picking a market and going for it, so if anybody has any feedback on whether I should or shouldn't go for one of the markets I've listed above, I'd appreciate it. If you have a better suggestion for a market that would be great, too!

Thanks in advance,

-Brian

Quote from @Cheryl Moore:

What neighborhoods are good to invest in, in Cleveland? 

 All and the burbs, IF you have a team in place and are cash 

Good luck 

What neighborhoods are good to invest in, in Cleveland? 

I keep on hearing from investors that "I'm waiting for interest rates to go down" or I hear "I need rates to go down for the numbers to make sense". Maybe these investors are saying this because they just got into investing in the past decade where the rates were basically zero or close to it. The past decade of interest rates on a 30 year fix mortgage has never happened before 2008. In the 70s and 80 they were 8, 9, 10, 11, 12, even 18 percent. Now do I think they will continue to reach those levels I don't know I'm not Jerome Powell or the chairman of Chase or BoA. One thing I will say if you are waiting for the interest rates to back down to 2, 3 percent, you might be waiting a long time. All I am saying, is if you are one of those investors that say "I'm waiting for interest rates to go back", you probably need a reality check and do some digging into the history of interest rates. And ask yourself, were we just really lucky in the past decade to be able to lock in a mortgage at 3%. Start to look at the 30 year fixed mortgage rates history graph.

Thanks for the post! I am going to check out the Cleveland market to invest. 

Quote from @Dan H.:

Here is a different reality:

- cleveland has a long history of declining population. It has declined over 50% from its population high and is still declining. https://en.wikipedia.org/wiki/Demographics_of_Cleveland.

- its appreciation since 2000 has been lower than the rate of inflation. This implies that in inflation adjusted dollars, the properties today are cheaper than they cost in the year 2000. Source neighborhoodScout.

- neighborhoodScout lists the appreciation as 1 out of 10 since the year 2000. This implies its appreciation is in the lowest 10% in the nation over that time frame.

- Case Shiller shows every large coastal city has produced on average far better returns for residential property for this century.

- NeighborhoodScout shows the average monthly appreciation on a residential property in San Diego, Orange County, LA, San Jose, and San Francisco for all durations of at least 10 up to 23 years exceeds the current entire average rent of a Cleveland unit.

This is not to imply that Cleveland is not a good market for Cleveland investors, that Cleveland does not have a low cost of entry (a result of long term horrendous appreciation), or produce a good/great initial cash flow (a by-product of its poor expectation for appreciation and rent growth as well as other risks including declining population).

Look with a discerning eye the location and profession of the various people who post. Are they unbiased posts? Do the posters have a financial incentive to lure buyers to the Cleveland market?

Do your research on any market you decide to invest in.  

 I have been an active investor in the Cleveland market since 1995.  Virtually every property (1000+) that I bought since 1995 has increased in value significantly.  This does not mean that you can pay full retail and count on appreciation to carry the day in most midwest markets.  The one thing that the analysis you quote misses is that, unlike in the coastal cities, an investor can consistently buy investment properties in this market at signicantly below retail.  Prudent investors that work with knowledgable local professionals in the industry should be able to consistently identify value add properties that will not only cash flow nicely but will be stabilized at a discount to retail pricing. 

Separately, the City of Cleveland and its adjoining suburbs have a large number of unique neighborhoods with unique dynamics that affect future value.  For example, the appreciation over the past decade in Cleveland neighborhoods like Ohio City, Tremont, and Detroit Shoreway as well suburbs like Lakewood have been tremendous.  The general statistics fail to paint an accurate picture for individual neighborhoods and properties.  

Every market has unique advantages and challenges.  People make and lose money in the same market every day.  Being a prudent investor who has performed an adequate amount of  market research (which in my opinion should include spending a little time on the ground and meeting numerous local professionals who hopefully have different viewpoints before your first purchase) is essential for success.  

Quote from @Jeremy H.:

Doesn't Cleveland have a declining population? Hasn't it been that way for awhile?

That's my hang-up. I hear a lot about it, I'm sure there's some positives I don't know about, I'm sure there's some success and I'm sure there's some horror stories too. What gets me is the housing is cheap and there's a ton of renters. 

The macro data from some brief research I did awhile back didn't look good. 

In fact, Columbus looked a lot better. If I'm moving to Ohio, why do I move to Cleveland over Columbus? Columbus had an increasing population...there must be a reason more people are moving there...

I mean Cleveland is what, the 2nd poorest city in the nation. The poverty rate is like 30%. 

I'm not trying to be argumentative here, just playing devils advocate. Why should I invest in a city that's losing population and is one of the poorest in the nation?

Jeremy, this is what people that aren't from the Midwest/Great Lakes/"Rust Belt" don't realize: Even though you'll still have "declining population", it doesn't mean that Cleveland is a cesspool. Cleveland has trendy and up and coming neighborhoods, a fantastic restaurant scene, 3 major league sports franchises, and is doing well in general. The Rust Belt will continue to have declining populations because in the heyday of Manufacturing, the Rust Belt was the Mecca of employment. Ask anyone in Detroit about the cultural significance of the Motown Era when Detroit was hopping with the Auto industry. Same thing in Cleveland/Akron/Youngstown: people were flocking to these area for well paying jobs in Steel and Manufacturing. The population is going to continue to decline because people from that era, who stuck around, are literally passing away. Otherwise, if someone is worried about poverty and war zones... don't invest in those neighborhoods! If investors want cash flow, you go to cities like Cleveland, Cincinnati, Toledo, Akron, Dayton (making sure I get all the keywords in for everyone). I understand appreciation is a great way to build wealth, and there are A and B class areas of any Midwest city were, if that's what you're looking for, you can do at a MUCH lower point of entry than the coastal cities. You can invest for appreciation in Columbus, too. Columbus is absolutely the crown jewel of Ohio: Great economy, state government, literally limitless expansion potential as it's surrounded by cornfields, high property values. But, you're not going to cash flow well around there in general, because the secret has been out for a while. That's why investors looking to invest in Ohio (landlord-friendly state for the most part), are looking at the "declining population" areas as places to buy great properties that meet their cash-flow investment criteria. 

Bottom line: Sometimes the macro data doesn't tell the whole story. 

Doesn't Cleveland have a declining population? Hasn't it been that way for awhile?

That's my hang-up. I hear a lot about it, I'm sure there's some positives I don't know about, I'm sure there's some success and I'm sure there's some horror stories too. What gets me is the housing is cheap and there's a ton of renters. 

The macro data from some brief research I did awhile back didn't look good. 

In fact, Columbus looked a lot better. If I'm moving to Ohio, why do I move to Cleveland over Columbus? Columbus had an increasing population...there must be a reason more people are moving there...

I mean Cleveland is what, the 2nd poorest city in the nation. The poverty rate is like 30%. 

I'm not trying to be argumentative here, just playing devils advocate. Why should I invest in a city that's losing population and is one of the poorest in the nation?

Here is a different reality:

- cleveland has a long history of declining population. It has declined over 50% from its population high and is still declining. https://en.wikipedia.org/wiki/Demographics_of_Cleveland.

- its appreciation since 2000 has been lower than the rate of inflation. This implies that in inflation adjusted dollars, the properties today are cheaper than they cost in the year 2000. Source neighborhoodScout.

- neighborhoodScout lists the appreciation as 1 out of 10 since the year 2000. This implies its appreciation is in the lowest 10% in the nation over that time frame.

- Case Shiller shows every large coastal city has produced on average far better returns for residential property for this century.

- NeighborhoodScout shows the average monthly appreciation on a residential property in San Diego, Orange County, LA, San Jose, and San Francisco for all durations of at least 10 up to 23 years exceeds the current entire average rent of a Cleveland unit.

This is not to imply that Cleveland is not a good market for Cleveland investors, that Cleveland does not have a low cost of entry (a result of long term horrendous appreciation), or produce a good/great initial cash flow (a by-product of its poor expectation for appreciation and rent growth as well as other risks including declining population).

Look with a discerning eye the location and profession of the various people who post. Are they unbiased posts? Do the posters have a financial incentive to lure buyers to the Cleveland market?

Do your research on any market you decide to invest in.