ATTOM Data Solutions, formerly RealtyTrac, recently published their 2017 Housing News Report newsletter and it's chock full of important information if you're a real estate investor - and features an article I was interviewed for about the Cleveland housing market, written by Daren Blomquist, SR. VP - ATTOM Data Solutions, who will be speaking at our Flip & Fund Summit 7 in Dallas, Texas May 5-7th.
City on Fire
Cleveland might be on the map for a few different reasons since 2016 wrapped up - maybe because we (finally) won a National Championship with our NBA team, the Cavaliers. You might have also heard that we hosted a little shindig called the Republican National Convention. Perhaps you knew that the Cleveland Indians won the American League Championship.
For whatever reason you've heard of this great city, there's no denying the demand for homes is gaining strength, with the volume of Cleveland-area home sales up on a year-over-year basis for six consecutive quarters ending in the second quarter of 2016.
While some areas of the city are booming and growing, there's the other side of things where ATTOM data shows that 22.8% were seriously underwater on their homes, owing at least 25% more than the home is worth.
"It's a tale of two cities," said Jim Rokakis, former county treasurer with Cuyahoga County, the central county in the metro area where the city of Cleveland is located. "There are areas that are doing extremely well. There are areas that are not doing well.
Out of about 15,000 vacant structures in Cleveland, 7,500 are in an area that real estate investors are eating up. The remaining 7,500 are in the more east-side neighborhoods that no one is willing to touch, yet. A countywide housing policy group involving more than 20 agencies that has been meeting monthly over the past 11 years to address foreclosure, blight and abandonment challenges in Cleveland.
I think the downtown Cleveland area has made such a roaring comeback and that trend is driven by 25- to 40- year olds moving back to downtown and adjacent neighborhoods such as Tremont and Ohio City. Because the downtown is so much fun, now you see investors like me buying up any lots in areas adjacent to downtown.
Jim Rokakis attributed the downtown renaissance largely to millennial buyers and renters.
"Proximity to downtown coupled with unique historic housing has made them hot again," he said, referring to neighborhoods such as Detroit Shoreway, Ohio City, Tremont, University Circle, Kamm's Corner and West Park. "They've kind of been discovered by millennials, and millennials are flocking to them. "Cleveland is very affordable. For a lot of kids who are facing issues of overwhelming college debt ... you can live here very affordably for about one-fifth of the average rent you would pay in San Francisco," Rokakis continued, citing two young employees of the Western Reserve Land Conservancy hailing from Oregon and Florida, both of whom are planning to put down roots in Cleveland. "They've come to love Cleveland and want to stay here."
When flipping an investment property, we want to be all in (purchase and rehab costs) for less than 80 grand. But in these cash flowing markets we are often able to go all in for less than 80 grand. Freeland Ventures often works with out-of-town investors attracted to Cleveland because of the good cash flow opportunities available.
We love the Cleveland market. If you want cash flow, Cleveland has to be one of the most undervalued markets in the country.