So you’re looking to invest in the Cleveland market?
Written September 2020. Remember market conditions can change rapidly.
In previous months, I received an overwhelming amount of investor inquiries, mostly from other states. Why are people looking to Cleveland? Maybe you are here reading this page because you heard from a source that Cleveland is hot for real estate investing.
Let’s unwrap that theory.
Facts about Cleveland
- Cleveland, just like most cities, has its good and not so good areas. And these areas are sometimes separated by only a block or two.
- In recent years, Cleveland has experienced revitalization in several areas. Locations like Ohio City and Tremont are examples of areas that have been revitalized and now are booming, which you can view on this map. So you have these great locations where people are moving in, surrounded by older neighborhoods. Will those areas also come back? No one knows.
- Our real estate market is currently hot and highly competitive (as of Nov. 2020) for buyers. Economists forecast that 2021 will be much of the same. This means you will pay top dollar for real estate.
- Cleveland is an old city. This city has been around for over 200 years. (Est. 1796). So when you visit, don’t expect anything fancy. But we do have tons of character and beautiful architecture.
- Public transportation is highly accessible.
- When downtown, you can only go west, east, or south. The only way to go north is by boat. Properties along Lake Erie are at a premium. And contrary to any rumors you may have heard in the past, Lake Erie is beautiful and the fishing is good!
- We have a huge metropark system that spans across all of Greater Cleveland, plus several beaches, and miles and miles of towpath that run in every direction.
- We are home to world-renowned heathcare systems (Cleveland Clinic Foundation, University Hospitals) and top choices for higher education (Case Western Reserve Universty, John Carroll University, Cleveland State University, and nearby Kent State University).
- We have the second largest performing arts center (Playhouse Square) in the country, second only to New York!
The Cleveland Rental Market
When a rental property hits the market, it is not uncommon to receive an overwhelming response from potential tenants. Because of this, rentals that are priced right usually rent immediately. Of course, this is just a general rule and exceptions do apply.
Average Rental Rates in Cleveland
When doing research online to find out how much properties rent for in any given area, the information may not always be accurate. This is because, as stated in the section “Facts About Cleveland,” you can have a mix of premium properties and low income properties within blocks of each other. Trying to average those rents will not be accurate for whatever type of property you are purchasing. Ask your realtor to pull comparable rentals for you to determine how much a home may be able to collect in rent.
Trying to manage your investment property from another state can be tricky. Keller Williams offers property management services, as well as several independent companies in the area.You’ll have to search to find a reputable company to manage your property.
When deciding how you will manage your property, keep in mind –
A real estate agent CANNOT manage your property without a broker’s license.
A real estate agent CAN secure potential tenants for you via advertising.
A real estate agent CANNOT draw-up or manage a lease – you must provide the lease directly to the tenant.
A real estate agent CAN vet potential tenants –verify identity, check eviction history, income verification, criminal history, address history, credit history and employment status. This information will be forwarded to you at no cost to you so that you can make an educated decision when selecting a tenant.
A real estate agent CANNOT choose your tenant.
A real estate agent CANNOT hire contractors, clean a property, or perform any other duties of a property manager.
A real estate agent CAN recommend contractors.
What Suburbs in Cleveland are Good for Investors?
You probably thought I was going to tell you where to invest, but I can’t. In real estate law, a real estate agent is not permitted to “steer” a client toward one area or another.
I recommend you look at city-data.com to check various locations around Greater Cleveland for demographics, local economy, crime stats, etc.
Also, use the tools at greatschools.org to find out how school systems rank.
You can also check out online articles like this one and community forums or Facebook groups to learn more about specific communities.
Bottom line, you’ll have to do a little digging. And I highly recommend you do this research before you are ready to purchase. You won’t have time to do it after you find a property because they are selling quickly and you’ll have to be ready to move fast once you find one.
Property taxes vary from city to city. You can view the current tax rates here.
In Cuyahoga County, taxes are paid “in arrears” – meaning taxes are paid 6 months after the tax period. Why? Who knows. Keep this in mind when you go to sell. You will owe back taxes.
Point of Sale Inspections
Some cities require a POS (point of sale) inspection prior to transferring ownership of the property. To view the list of cities that require an inspection, click here. This list may need to be updated so check with the specific city(ies) to verify.
When a seller in a community that requires a point of sale lists their house for sale, they will have to apply to the city for the POS inspection.This inspection will be conducted by a city inspector and results will be delivered to the homeowner. They can review the violations (if any) and decide if they are going to take care of the repairs or leave it to the new owner.
The city will require repairs to be handled by a certain date as noted on the inspection report. If the new owner is to assume the violations, the city will likely require funds to be held in escrow to ensure the work will be completed. Once completed, the city will come back out to reinspect.
Oftentimes, distressed properties, low income properties, and estate sales state that the new owner will be responsible for the POS violations. This will be indicated in the MLS listing on the agent side so check with your agent before making an offer on the property. If you are buying an unlisted property, be sure to ask the seller for a copy of the inspection report prior to making an offer.
Yep, it’s a thing. And fairly common. Bottom line is there are many investors watching the Cleveland market and grabbing properties that seem to be a good investment as soon as they hit the market. So you have to be prepared.
How to prepare:
- Complete all standard disclaimers in advance and have your real estate agent keep them on file and ready to go.
- Provide your agent with a copy of your preapproval letter or proof of funds in advance.
- Know the market and have your research done before you’re ready to make an offer on a property.
- Crunch your numbers. Figure out your cash flow and see if the property will work for you financially.
When there is a multiple offer situation, the listing agent will usually announce to all parties that the seller is calling for “highest and best” by a certain date and time. This gives you an opportunity to revise your offer should you desire to do so.
You can do any combination of the following:
- Increase your purchase price.
- Add an escalation clause to your offer, stating you will pay a certain amount over the top offer (with a cap, of course).
- Change your terms – close sooner, pay with cash, offer a higher earnest amount deposit, be willing to accept the home as-is, be willing to incur city point-of-sale violations (review those carefully before agreeing to take them on!), forego certain inspections (I highly recommend always having a general home inspection).
Questions You Should Never Ask Your REALTOR®
There are some questions a real estate agent is not permitted to answer:
Where would you buy?
Do you think the property value will go up?
Where’s the best neighborhood for investing?
Is this a good location?
How much should I offer?
What do you think I can get for rent?
Do you think the tenants are good people?
Do you think the seller’s are honest?
Would you buy this property?
If you want to know the market conditions, average home price, average rent, and neighborhood trends, your agent can pull market data for you. Just ask!
First things first. If you need to finance your purchase, you’ll need to get a letter from a mortgage lender to have ready for when you present your offer. The letter should state that you are able to purchase up to a certain dollar amount. The best option is to go with KW Mortgage which will save you thousands of dollars.*
⇒ ZERO loan origination fee
⇒ ZERO application fee
⇒ ZERO underwriting fee
⇒ ZERO processing fee
Contact Matt Sheffey to get started:
Senior Mortgage Loan Officer
*when you work with a KW agent.
Enlisting the Help of a REALTOR®
Do you need an Agent to help you purchase an investment property in Cleveland? I will gladly assist you or match you with an agent who serves the area you are looking in.
Due to the market conditions and the possibility that it may take a few offers before you land a property, I do require investors to complete a buyer’s agreement committing to use me as your agent in your real estate purchase.
I also ask for a deposit of $500 to be held in escrow and applied toward your purchase. I have had many potential buyers ask for my assistance only to walk away without purchasing a property. This incurs many hours of my time and when my client doesn’t purchase a home, I am not paid for the long hours I put in.
If you decide not to purchase after I have assisted you in gathering property data and/or submitting an offer on a property, a portion of your deposit may be retained to compensate me for my time. Fair enough?
I’m ready to go to work for you! Give me a call at 440-508-6088 to discuss your real estate goals.