One of the most frequent questions I get is “How did you score your awesome Cleveland property deals?”
My sense is that the people asking are hoping I have some thrilling story about how I worked some inside connections, sought out hard-to-find sellers, navigated a bunch of sneaky back channels, and somehow used magic and voodoo to make awesome deals happen.
However, the real answer, at least for the majority of my properties, is usually sort of a let down for all these people who are hoping that I have some secret outlet for finding great deals on properties. I typically find my deals… (ready for it???)… on the MLS. Yep, that’s right. The multiple listing service. Houses listed on the open market by a brokerage, plainly visible for all the world to see on realtor.com and write an offer on, if anyone so desires.
Quite often there are great opportunities right in plain sight. There for the taking, for anyone who knows what to look for and how to navigate the deal. To illustrate how buying off of the MLS can be a solid plan of attack, I’ll lay out the acquisition details on all seven of my current Cleveland area buy-and-hold rental properties in this post. (One property of the seven I currently own was technically not on the MLS, as it was a pocket listing that my broker knew about from another broker… but that was an anomaly for me, and I still stick to my guns that some of the best deals out there can indeed be found on the MLS!)
It does, I must concede, take a lot of searching through the MLS to actually find those great deals though. I would say that for every 200 listings that show up in my target area when I am seeking another acquisition, 60-80 actually meet my initial criteria and make my “short list”. Of those, I would say I am able to actually get into half (the other half already went pending, or have uncooperative tenants who just won’t let anyone in, or have uncooperative agents). And then of those 30-40 properties that I actually physically tour, about two are worth pursuing, and one will actually turn into a deal!
Without further ado, I’ll move on to the details of my actual Cleveland area properties…
Acquisition 1 (2015) – North Collinwood Single Family House – MLS Listing
My first acquisition in the Cleveland area (at least first in a long while, since I was a college student in the late 1990s) was a 1-story, 1940s-built single family house in the North Collinwood neighborhood of Cleveland. This acquisition was a short sale, meaning the seller was attempting to sell the property for less than she owed on the balance of the mortgage.
Short sales are often used by sellers in situations where their property value has declined considerably since they purchased or refinanced it, and they are “underwater” (meaning they owe more on the property than it is currently worth). The snag is that the bank, who is still owed a lot of money, has to agree to let the seller off the hook for the difference between what the seller still owes and what they can sell the property for in an arms length transaction (i.e. selling it to someone they do not know). Banks are notorious for taking a long time to approve short sales, as they need to verify that the property did indeed decline in value, confirm that the seller does not have the means to pay off the mortgage, etc., and all this takes a lot of time.
This particular property had been owner occupied, and just needed minor cosmetic updating, such as paint, carpeting, etc. It had all of the major important stuff already in place — newer vinyl siding, vinyl windows, dimensional shingles, and updated mechanical and electrical systems. Because the work needed was fairly minor, my property manager was able to get this house rent-ready shortly after closing. And the deal I scored?? I paid about 75% less than the seller had paid for the house eight years earlier, and the first-year GRM (gross rent multiplier) was 2.94!
How was I able to get such a good deal on a house that didn’t really need much work? A few things contributed to this. First off, the house was on the market for a couple of months already, but had been marketed with only a single exterior photo (minimal marketing is a sure fire way to avoid catching many buyers’ attention). Second, it was hard to schedule showings, as the owner had actually already moved out and any showing had to be coordinated with her son who was still living there by himself (I think my broker and I attempted three showings before we actually managed to get inside!). Third, because it was a short sale, it required a long time to close — in this case seven months from the time I wrote the offer until the date it actually closed — not that many buyers had the patience to wait that long! And finally, fourth, I was paying cash for the property and could write an offer with no contingencies, which is highly desired in short sale situations, both from the seller’s perspective and the bank’s, as they want to have a high degree of confidence that the deal will actually close.
Acquisition 2 (2015) – North Collinwood Duplex – MLS Listing
My next acquisition in Cleveland was another short sale in the North Collinwood neighborhood, but this time was a side-by-side duplex. But not just any duplex… this property, built in the 1990s, was probably the newest duplex in the area, so most of the plagues of an old Cleveland duplex were lacking. There was no musty basement, no outdated wiring, and certainly no chance of asbestos or lead paint hazard anywhere on the property.
The property was already fully tenant-occupied, but had been rather neglected by the owner for a number of years. Though nothing major needed to be done, a long list of repairs and deferred maintenance items had to be addressed after taking ownership. Moreover, the tenant in one of the units was extremely uncooperative (and basically just wasn’t paying rent at all at that point), so that was something that had to be dealt with as well.
The deal I got on this one made dealing with a problem tenant very worth it though — My total acquisition cost was a full 82% less than the sellers had paid for the property ten years earlier! To make things even more amazing on this deal, the first-year GRM on this property was an INSANELY low 1.90 (and that was based on the remaining inherited tenant’s below market rent)!
Part of my edge in nabbing this deal was, of course, the fact that I was paying cash. An even bigger component was my willingness to deal with a tricky tenant situation though — The unit with the problem tenant was a big unknown up until closing. (Fortunately she ended up leaving on her own, without having to file eviction, within about two months and eventual the rent-ready rehab cost a bit less than $5K for the unit).
Acquisition 3 (2016) – Euclid Single Family House – MLS Listing
My third acquisition was yet another short sale, but this time in the east side suburb of Euclid. This 2-story 1940s-built single family house was owner-occupied, and was generally very well maintained. There had been a minor fire in the house just a couple of years prior, so it was basically totally renovated throughout post-fire, no doubt paid for by the homeowner’s insurance.
Though this was truly a really nice house, the city of Euclid, in their typical fussy ways, required quite a few minor things to be addressed following their point of sale inspection. In a point of sale inspection, which is common in many suburbs of Cleveland, the city building/housing department will inspect a house prior to its transfer and require that any violations be corrected by the seller or formally assumed by the buyer (typically requiring notarized forms with the buyer promising to correct the violations within a certain time period, and often having to escrow funds as a guarantee that the violations actually will be addressed). Euclid has a notoriously strict point of sale requirement, and they insist on literally no peeling paint anywhere (even on a rear-facing garage window sill, for example), up to date furnace inspections/servicing, smoke detectors, etc. I had to assume about $3,000 worth of minor violations on this house, and it took the contractor about 6 weeks to get the violations fully cleared.
All-in on this Euclid house, my total acquisition cost was about 60% less than the previous owner had paid for the house ten years earlier. The first-year GRM on this property was 4.14, making it a very solid investment in a very decent suburban location.
I managed to get this deal because, just as in my previous short sales, I was a cash buyer and I had the patience to wait out the short sale approval process. Because it had been listed by the same brokerage that had listed my previous acquisition (the North Collinwood duplex), that might have won me some points as well, since that transaction established me as a buyer with all his ducks in a row.
Acquisition 4 (2017) – Garfield Heights Single Family House – Pocket Listing (Not on MLS)
My next acquisition was actually just a regular sale, rather than a short sale. It was a charming 1920s bungalow in Garfield Heights, a southeast suburb of Cleveland. The seller had bought the property as an REO (“Real Estate Owned”, meaning bank-owned property) several years earlier, and had done some major updating during the years that she owned it. Rather than list it on the MLS, the seller had the broker put the word out amongst his circle — and luckily for me, my broker is part of that circle!
This property was purchased point-of-sale compliant, and needed no work prior to putting it on the rental market. Though I did pay more for the property than the seller had paid when she bought it from the bank, I still got it for a little less than half of its previous peak value, with a first-year GRM of 3.84.
Acquisition 5 (2017) – Cleveland Heights Single Family House – MLS Listing
The acquisition of my Cleveland Heights 1920s two-story single family house was also just a regular sale, but unlike my Garfield Heights deal, this one was listed on the MLS. The property was owned by an investor who had bought it as an REO several years earlier and did some renovation work and updating in order to get it rented. It was tenant-occupied when I bought it, with the same renter in place for over five years.
This house was also purchased point-of-sale compliant, and needed no work when I bought it. The same tenant remained in the house (and is still there now, two years later as I write this post), making for a pretty easy investment property overall. Though I paid more than the seller had bought the house for, my acquisition cost was still 67% lower than its previous peak value, circa 2006. The GRM based on the first year’s rent rate was 3.76 — Not too shabby for an investment property that required nothing other than some emails, a few signatures, and a wire transfer.
This particular deal was an interesting one, because it was a property that was already being managed by my current property manager, but was rented for considerably lower than the current market rents for the area. I was able to confirm with my property manager that the tenant was responsible and was not delinquent in rent, and I bought the property despite not being able to walk the interior (the tenant was generally not open to allowing showings to potential buyers). I believe that most investors were leery of buying a property that was rented for a way-below-market rate AND that they could not easily walk (especially a couple of years ago, before out-of-town investors were buying Cleveland properties in droves), but the fact that my property manager was already managing the house (and had actually placed that tenant in there several years prior) gave me the confidence to do the deal! (In case anyone is wondering, that tenant still pays way below market rent… though it has been increased a little since I bought the house… I feel it’s better to have a responsible and predictable long-term tenant stay in place and pay a lower rent than to have to spend thousands of dollars on a turnover and roll the dice on a new tenant.)
Acquisition 6 (2018) – Bedford Single Family House – MLS Listing
My sixth acquisition was a 1920s single family bungalow in Bedford, a further-out suburb on the southeast side. This property was listed on the MLS, and was a regular sale that was owned by an individual whose family had resided in the house for many years. It had a lot of major updates over the years, but also still needed a bit of work to get it rent-ready.
I had planned on doing basic cosmetic work (paint, carpet, door hardware) and making a few repairs… however the city of Bedford required quite a bit more when they did their rental inspection — lots of stuff I did not think was necessary (removing an old metal shed from the back yard, grinding out a tree stump in the back yard, and several other things) ended up being on their rental violation list, so the cost to get the house rent-ready was considerably higher than planned. And then, on top of that, about a month after the tenant moved it was discovered that the storm sewer line had partially collapsed and had to be replaced (setting me back another $7,000 or so), so this property definitely did not perform as projected.
Even taking into account all of the repairs and the storm sewer line repair as part of the acquisition cost, I acquired the property for about 23% less than its peak value; the first-year GRM is 6.00. So was this my finest deal? Absolutely not. But was it the worst deal on earth? Not at all. Plenty of investors in the Cleveland market are pursuing properties with GRMs of 8+ (as a reminder, the “1% rule” means a GRM of 8.33 — any GRM lower than that means you’re collecting more than 1% of the acquisition cost in gross rent each month).
I was able to secure this property pretty easily due to the fact that I was paying cash, and there was not much competition for it because it was not marketed all that well. Once you get to know a market intimately, you start to understand which brokers market their listings well and get top dollar, and which ones don’t market quite as well and don’t usually get top dollar or fast sales. This property was listed by a broker who I would definitely put into the latter category.
Acquisition 7 (2019) – North Collinwood Single Family House (yes, another one) – MLS Listing
Finally, my most recent acquisition was yet another property in the North Collinwood neighborhood. This 1940s-built two-story single family cottage was a regular sale, occupied by a long-term tenant who has been in the house for about five years already, but paying a below-market rent. The seller bought the house for next to nothing a while back under auction terms, and did some updating to make the property rent-ready.
Aside from a few minor repairs needing to be done, this house was pretty much smooth sailing.
The acquisition cost of this property was about 55% less than what it had sold for in 2007, and the first-year GRM of 4.35. I am leaving the below-market rent in place for this tenant, just as I did with the Cleveland Heights property… but if I would have increased it, that GRM would actually have dropped quite a bit.
I was able to secure this property MLS-listed property by making a contingency-free cash offer, and by being persistent in trying to get an opportunity to walk the house (my broker and I had to try multiple times before we were able to schedule a time that the tenant would be able to let us in to walk the house). Additionally, the current tenant’s below-market rent likely discouraged many potential investors as well.
MLS Listings — Fair Game for Anyone!
I hope this post has helped you to see that there truly are plenty of solid opportunities out there that don’t require any special connections or channels. MLS listings are fair game for anyone, and you can find these on any number of websites on your own. You just have to be persistent, diligent and quick. The better prepared you are, with your cash or financing ready to roll, the more likely you will be to snag amazing deals when the opportunity presents. And always remember that luck comes to those who are prepared!