All Forum Posts by: Vadim F.

Something is not adding up here. My property recently underwent a Sec 8 inspection in Cleveland. It was scheduled, inspector came when they said they would, did the inspection. It failed, sent me a list of items that need to be addressed, and automatically rescheduled the re-inspection for 3 weeks later.I had my guy come and address all the issues 3 days later. Inspection passed and I raised my rents by $300mo.

0 Votes

Cleveland, Ohio

Quote from @Nina Sid:

Quote from @James Wise:

Quote from @Nina Sid:

I was presented a property on the corner of 116th and Union Avenue, close to Mt. Pleasant and Union Miles Park. It is fairly new (built in the 2000s) which is quite rare and will likely rent out to a voucher Section 8 tenant for around $1300-$1400. They are asking $100k. Any thoughts on whether I should consider that area or stay away? Will the property be difficult to resell if I wanted to in a year or two?

It's the hood. If you want to own a property in the hood, go for it. If you don't, don't.

Thank you for everyone’s input! I have passed on the opportunity but if anyone comes across any similar opportunities in a better area please let me know!

There are tons of opportunities in Cleveland, especially if you have the right team in place. Just because its the hood doesn't make it a bad investment. Just do your research on what is going on in Cleveland, get a solid team in place and you will succeed.

0 Votes

Cleveland, Ohio

Quote from @Nina Sid:

Union Miles is a rough area, but like all rough areas its street by street. If you have boots on the ground, I would highly recommend working with them and getting the details on the block its located.

1 Vote

Cleveland, Ohio

Investment Info:

0 Votes

Quote from @Christine Wilcher:

Hello!

I'm purchasing my 2nd investment property and working with Truist bank. They are asking for 20% down and providing a 7.1% interest rate. They are charging me 3.389% in points! I calculated 5% in closing cost. Does this sound reasonable? Lender says if I don't take the points I then need to put down 25%. Thoughts?

How much is the property, how much are the closing costs? Without much info provided it seems reasonable given todays market.

0 Votes

Akron, Ohio

This thread is very interesting. As an investor, I always want to get everything done for the cheapest price......but as the saying goes you get what you paid for. If I am in need of a major rehab, I will hire a GC. I will get markup on the material, on the labor, etc. because it's just part of business. But at the same time if the GC does a solid job, I will be bringing them on for more work. And what happens after is you build a relationship with them. Once you have relationships in place, then there can be some favoritism and you can potentially get some breaks on prices. At the same time I feel people don't understand that the markup of GCs material most of the time comes out to the same cost as you would go buying it yourself. May be at most, you're paying a 10% premium. If you value your time and put a price to it, that 10% you pay for the GC buying, checking and delivering your material is priceless.

Now if you want to nickel and dime, go get a handyman off the street. There are plenty of jack-of-all-trades out there, I use them for minor work here and there. But for a big project I'm going licensed GC who backs their work and backs their repuation.

2 Votes

Quote from @Becca F.:

Quote from @Jay Hinrichs:

Quote from @Becca F.:

Quote from @Account Closed:

Hi Becca,

If you don't mind a question : What was the driver to purchase the Indy SFR's that are cash flow negative? Too good to pass up?

If you can ride it out for 5 years (60 months at $200 month negative cash flow x 2 properties = $24k cost to hold on!) you'll increase rents and an opportunity to refi at a lower rate. Is it worth spending the extra $24k to you to keep these in your portfolio for 5 years?

The only reason I'd suggest holding on a bit longer with your Indy SFR's is you already paid the transaction costs to get into those deals. You'd have to pay those transaction costs again when you sell, plus hopefully incur some capital gains (profits!). If you can let your appreciation tree grow a bit your returns will be better should you choose to sell down the road.

If you can rework the numbers (raise rent a little each year) and get to net positive, the appreciation will come. Getting the debt service covered is vital each month.

Working a W2 position, investing in Real Estate and being a mom is lot! I respect the pressure you're putting on yourself, but take a step back and look at what you've managed to accomplish. You have a real estate portfolio that will allow you make some great choices for you, your family and kids future.

It sounds like your plan to have your SF area SFR cash flow at $2k per month is the biggest bucks for the bang (of the hammer). If you put that plan into effect will the cash flow off set your Indy properties monthly loss until rates drop a bit or you're able to raise rents?

I don't envy having family as tenants. That makes each decision more difficult and tends to change your lens from RE investor to "giving my family a good deal." While noble, it allows you to not fully maximize your returns of your REI portfolio.

What you've achieved is amazing, so drink that in.

Great points about the transaction costs! Reading the BP forums, many people have recommended the Midwest for those of us living in California. Indiana is landlord friendly and the price points are affordable especially for new investors but is it the best strategy for what I'm trying to achieve? The monthly payments are much lower than buying in California, Nevada or Arizona if the house were to sit vacant. Cash flow is very difficult to come by now with current interest rates. So if hit 3 out of 4 - appreciation, principal pay down and tax benefits that was acceptable to me.

To give more context, Indy SFH#1 I bought it for $140,000 in 2013 and it's now worth around $285,000, in a nice suburb. My interest rate is 3.875% and I did a $50,000 cash out refinance on it during the pandemic to help pay for renovations to the California SFH rental. I guess if I just did a rate and term refinance maybe I would be a little more cash flow positive.

On Indy SFH#2 purchased in March 2023 for $130,000 with 20% down at 6.99%. I used a rental property calculator and factored in 20 year hold, with 3% appreciation and 3% increase (rent increase, property tax, insurance, repairs, etc). I didn't put in capital expenses in this calculator since this was a renovated home - I keep a large reserve for each property. I put in $1300 annual to account for repairs the first year. The Internal Rate of Return is just under 12% and cap rate and 6.52%. I don't go too much by cap rates since I've heard that it's less accurate for SFHs. At Year 5 the cash flow increases significantly and Cash on Cash return is 4% and CoC is 10% at Year 11. This is a Class C potentially moving up to B area (according to the locals) so as homes are renovated, higher income tenants or primary home owners move in so that was the appreciation part. I also got feedback from two local Indy investors before submitting any offers.

Thanks for your positive words!

that all works until your condenser is stolen right ?

I just closed in Indy SFH#3 and this one has a cage around the AC unit. :) I have my PM Company on this property now.

Just an aside, prior to buying Indy #2 earlier this year, I looked at other inexpensive markets with 2 turnkey companies in one in Memphis and one who covers Cleveland, St. Louis and Detroit. The numbers look great on paper but no one tells you about the cap ex expenses, repairs, higher turnover of Class C properties, stolen AC units, etc. I started adding up the monthly payments of the 3 Indy properties and the 3 rents (projected rent on SFH#3 since it hasn't been rented out yet) and I could buy something in Northern California within driving distance or something in an appreciating state Nevada or Arizona with lower property taxes in NV and AZ. With long term rentals and interest rates it would still be cash flow negative but may need to look at other options, MTR or STR (to traveling business people, not people vacationing).

I'm doing some re-assessment. I'm not saying investing in the Midwest is bad. It's landlord friendly and low barrier of entry with low purchase prices but with all my CA equity it might not be the best strategy for long term wealth building for me.

@Becca F. you mention you looked into other midwest markets that offer turnkey properties, can I ask why you want turnkey? Cleveland being a market I invest in, you can find a 3/4br SFH for 60-70k in an OK area on the east side, put in 15-20k into reno work and rent it out Sec 8 for $1200-1400mo. That will give you a NET 13-14% CoC return and possibility to either defer refi or cash-out refi and re-use those funds for more projects. If you go turnkey, you don't know what kind of work they did and you''ll get an 6-8% CoC return if you're lucky.

1 Vote

San Francisco, California

Quote from @Balkar Singh Kang:

Quote from @Steven Dragmen:

In my dealings with Section 8 the amount they end up allowing for a unit is never very clear. My understanding is it starts with their determination of fair market rent for the county. Then when there is a prospective tenant they make a determination after the property inspection taking into account overall condition and the tenants adjusted gross income. The adjusted gross income also determines the amount Section 8 will pay vs the tenant portion. I have had situations where section 8 pays the entire monthly rent but for most this will not happen. It is also important to be patient with the churning of the government gears. When a tenants income changes for the bad, you can be with out the tenants portion for a month or two but they will always catch up. Section 8 works well for me. BTW I get more rent with Section 8 in the city on the west side for a 2 br single than I have ever been allowed for a 2 br single in Euclid, same sq ft with far less in property taxes for the Cleveland property.

Steven,

I listed my two-bedroom single-family house for $1250, which is below the Fair Market Rent (FMR) of $1284 in the Cleveland zipcode 44125. However, today I received a rental determination from CMHA for $953, which is below the FMR. I have not accepted their offer yet.

The message from CMHA states that "The Housing Assistance Payment will be $953.00 and the tenant portion will be $0.00"

The tenant agrees to pay the balance.

I need guidance on whether I can approach CMHA to request an adjustment for the rental determination. Additionally, how should the contract be structured to cover the remaining portion to be paid by the tenant?

Are you local to Cleveland and self managing the property? If not, I would highly recommend you get a PM who is experienced with working with Sec 8. Some more question, have you worked with CMHA in the past? Have you looked at other govt subsidized programs in the Cleveland area such as Eden, VA, etc?

0 Votes

Cleveland, Ohio

Quote from @Matthew Sichel:

Hey All,

Over the last couple of years I purchased a few rental properties in the Cleveland area. Things were going good at first however now it seems like the issues just won’t stop. There’s constantly repairs being needed and the property’s are actually draining me at this point. Having a hard time convincing myself they are worth hanging onto as I’d rather re-allocate those funds to 1 nicer property or even the stock market then have 3 property’s that have turned into headaches. I know if I sell at this point I’d be lucky to break even on my purchase price for all 3. Any advice to someone relatively new to real estate investing going through a rough patch?

Also if their are any realtors in the area that would be open to discussing listing them or anyone interested buying a package of 3 properties already all rented out with long term tenants in place paying market rent please let me know.

Did you allocate funds to capex/maintenance on a monthly basis for this? If you purchased them a few years ago, then ideally you should have equity in them and not breakeven unless you are in warzones, but even those areas have appreciated well in the last few years.

0 Votes

Cleveland, Ohio

Quote from @Simon Hernandez:

Hi all, I've got a long, drawn out situation in Cleveland (I'm OOS) that I could use some help with. I purchased a duplex in the Little Arabia neighborhood over 2 years go through a well known company. For convenience I decided to use their PM services. It was occupied upon purchase and one of the tenants was not paying. Fast forward over a year later and nothing was accomplished except me paying monthly PM fees without any income on the property. So, I parted ways and signed up with a new PM group. They started out great and I payed over $13k for renovations (in-house contractor) per their estimates. Fast forward another 1.5 years and the duplex still remains unoccupied and there is no evidence of them ever completing any of the $13k in renovations (They've had the money for over a year). So, my problems are twofold. A) I need a new PM to take over that can do what they say they will do - with access to contractors that will perform. B) Figure out the best way to approach the missing $13k before the transition. They are basically dragging their feet at this point, not in contact hoping I'll give them another year to show something for the money. So far they've been unable to provide proof that any of the work was done despite my repeated requests. Can anyone point me in the right direction? I'm not naming names in public at this time. Thanks everyone!

Sorry to hear about the issues you're having. The property being duplex means you were getting income from 1 of the units, but due to non paying tenant and expenses that income balanced out to 0, is that correct? Also, were you unable to evict them because of the covid moratorium? For the new PM, how did you screen them? Did they come recommended to you another investor? Did you pay 13k upfront directly to them? Did you have them send you updates regarding the progress?

Sorry for all the questions, but curious how you got yourself into such a situation.

0 Votes

Cleveland, Ohio

All Forum Posts by: Vadim F.

Vadim F. has started 10 posts and replied 333 times.

Post: CMHA Section 8 Refuse to Pay Back Rent During Inspection

Post: Should I buy a rental property built in 44105?

Post: Should I buy a rental property built in 44105?

Post: First Buy and Hold

Post: Interest Rates and Points

Post: General Contractors refusing to quote without them buying materials

Post: Overleveraging, net worth, cash flow and headache factor

Post: how does section 8 determine rent price

Post: Thinking about selling

Post: Cleveland deal gone wrong - seeking advice and new PM