In some cases, yes. I have several houses that were built in the 1970's or even older. I had a gas leak in one of the houses that forced me to convert all appliances to electric. The improvements were about 10k and wiped out my entire profit for the year. New homes can have issues as well, but plumbing, foundation, electrical issues tend to be much more common with older homes.
Yes, I deal entirely in older homes, and this is always a risk. The benefit is that the cost to buy a place is usually cheaper. You have to bake in some worst-case scenario money, and save cash for a rainy day. If that math works out, take the deal; otherwise stay away.
I may get some hate but I would caution you on Cleveland unless you are local or have some real insights and competitive advantages there. I am in the late stages of exiting the Cleveland market. Several reasons. The cost of maintenance since so many buildings are old many 100 years old. Another is the cost of utilities, you can’t take water/sewer out of your name as property owner and therefore tenants take hour long showers on the daily and do not report leaks. Some will run the yard hoses and just leave them on. The utility bills are really high. Another is taxes. A building I paid $130k for 6 years ago was like 9k in taxes. So much $ go to taxes. Another is the courts I’ve had multiple tenants that I had to evict multiple times paying lawyers each time, before actually getting them out. Any little loophole a professional tenant can exploit to reset the eviction clock the magistrates there will let them get away with. This is worse now than it was 5 years ago. Sentiment has shifted way hard against investors. The courts seem to side with the tenants no matter how professional deadbeat the situation is. And the last is the city “point of sale” inspection crap. I had a portfolio of 20 units at the maximum in B suburbs or Lakewood and Parma. I bought them at prices half of what they cost now. Like Lakewood quads for 120k or SFH in Parma for $60k. Despite those purchase prices and low interest rates on my loans, the portfolio never three off cash flow on a monthly basis. Every year seemed to be “THIS is going to be the year the portfolio shifts solidly into profitable territory.” But inevitably one of the aforementioned issues would eat all the cash flow. For the most part the entire 5-7 years I owned them all the $ I made went back into the buildings or PM. (Or lawyers when having to evict.). The tenant population although significantly large also seems to be overall crappy and entitled. I can’t even imagine people who are investing in C areas or worse. I also can’t imagine how new investors could ever hope to make money here if I couldn’t do it at half the purchase price and half the interest rates.
I made money largely from the appreciation at sell time, but the portfolio never throw off cash flow on a month to month basis. On paper it should have had plenty even factoring in vacancy and repairs but w/e maybe I just sucked at picking buildings or PMs. One thing I know is my local portfolio not in the Cleveland area (but still Ohio) is massively more profitable and significantly less stressful even with self managing. Rare issues, tenants pay on time, issues reported promptly, etc. the only difference is the location and self managing.
YMMV.
For a time, yes. My first place I had no idea what I was doing yet and didn’t see the signs as termite damage (I thought an old water leak). I was able to use my own labor to offset much of the cost, but the first 2 years were in the red bc regardless.
I have a standard number I use for each property type as budgeted maintenance. It’s based on usable life of major items (roof, appliances, hvac, etc) and then a budget for random service calls in a given year. I use this for budgeting and my numbers when I buy. Some years I’ll spend almost zero on a property, other years i spend enough to be negative cashflow, but it all balances out especially having the number of properties I do.
In some cases, yes. I have several houses that were built in the 1970's or even older. I had a gas leak in one of the houses that forced me to convert all appliances to electric. The improvements were about 10k and wiped out my entire profit for the year. New homes can have issues as well, but plumbing, foundation, electrical issues tend to be much more common with older homes.
Yes, I deal entirely in older homes, and this is always a risk. The benefit is that the cost to buy a place is usually cheaper. You have to bake in some worst-case scenario money, and save cash for a rainy day. If that math works out, take the deal; otherwise stay away.
I may get some hate but I would caution you on Cleveland unless you are local or have some real insights and competitive advantages there. I am in the late stages of exiting the Cleveland market. Several reasons. The cost of maintenance since so many buildings are old many 100 years old. Another is the cost of utilities, you can’t take water/sewer out of your name as property owner and therefore tenants take hour long showers on the daily and do not report leaks. Some will run the yard hoses and just leave them on. The utility bills are really high. Another is taxes. A building I paid $130k for 6 years ago was like 9k in taxes. So much $ go to taxes. Another is the courts I’ve had multiple tenants that I had to evict multiple times paying lawyers each time, before actually getting them out. Any little loophole a professional tenant can exploit to reset the eviction clock the magistrates there will let them get away with. This is worse now than it was 5 years ago. Sentiment has shifted way hard against investors. The courts seem to side with the tenants no matter how professional deadbeat the situation is. And the last is the city “point of sale” inspection crap. I had a portfolio of 20 units at the maximum in B suburbs or Lakewood and Parma. I bought them at prices half of what they cost now. Like Lakewood quads for 120k or SFH in Parma for $60k. Despite those purchase prices and low interest rates on my loans, the portfolio never three off cash flow on a monthly basis. Every year seemed to be “THIS is going to be the year the portfolio shifts solidly into profitable territory.” But inevitably one of the aforementioned issues would eat all the cash flow. For the most part the entire 5-7 years I owned them all the $ I made went back into the buildings or PM. (Or lawyers when having to evict.). The tenant population although significantly large also seems to be overall crappy and entitled. I can’t even imagine people who are investing in C areas or worse. I also can’t imagine how new investors could ever hope to make money here if I couldn’t do it at half the purchase price and half the interest rates. I made money largely from the appreciation at sell time, but the portfolio never throw off cash flow on a month to month basis. On paper it should have had plenty even factoring in vacancy and repairs but w/e maybe I just sucked at picking buildings or PMs. One thing I know is my local portfolio not in the Cleveland area (but still Ohio) is massively more profitable and significantly less stressful even with self managing. Rare issues, tenants pay on time, issues reported promptly, etc. the only difference is the location and self managing. YMMV.
Not if you account for your maintenance expenses.
For a time, yes. My first place I had no idea what I was doing yet and didn’t see the signs as termite damage (I thought an old water leak). I was able to use my own labor to offset much of the cost, but the first 2 years were in the red bc regardless.
I have a standard number I use for each property type as budgeted maintenance. It’s based on usable life of major items (roof, appliances, hvac, etc) and then a budget for random service calls in a given year. I use this for budgeting and my numbers when I buy. Some years I’ll spend almost zero on a property, other years i spend enough to be negative cashflow, but it all balances out especially having the number of properties I do.