Why Cleveland?
WHY IS THE CLEVELAND AREA A GOOD PLACE TO INVEST IN REAL ESTATE?
The Cleveland market is an ideal place for real estate investment as it is a major city/metro area with a strong and diverse economy — there is the potential for exceptionally strong returns, in terms of both cash flow and upside potential as property values regain their recession-era losses.
Local Economy
Though Cleveland has always had some diversity in its economy, it has shifted considerably further away from the industrial "blue collar" base to a more "white collar" economy over the past decades, with a particularly noteworthy emphasis on healthcare. The healthcare shift, anchored primarily by the Cleveland Clinic and University Hospitals, has resulted in a number of burgeoning healthcare and life sciences oriented startups, particularly in the 3-mile stretch between downtown and University Circle, known as the "Health Tech Corridor" (HTC). Additionally, a number of Fortune 500 Companies are headquartered in the Cleveland area, in industries ranging from consumer products to financial services to industrial products. Many major consultancies, such as Deloitte, Accenture, and McKinsey & Company have offices in Cleveland as well.
"BIG CITY" QUALIFICATIONS
While Cleveland is certainly no LA, NYC, or SF, it really does have big city street cred, and it has 200+ years of history behind it. Though it has not been one of the top 10 largest cities in the USA by population since the 1970s (due largely to outward sprawl away from the urban core), a look at the city's infrastructure, both physical and cultural, makes it evident that it has roots as a major industrial city. The Cleveland area is home to professional sports teams in baseball, football, and basketball, and it is the home of world-renowned cultural institutions such as the Cleveland Museum of Art, the Cleveland Orchestra, the Rock & Roll Hall of Fame, and the Cleveland Ballet. It has many noteworthy colleges and universities, and is even an international port, with its presence on Lake Erie.
PRICE-TO-RENT RATIO
The Cleveland market has one of the lowest price-to-rent ratios in the USA. A simplified explanation of this is that it is generally less costly to buy a property than to rent one, relatively speaking, than almost anywhere else in the country. Fairly low prices to purchase properties combined with the moderate rents of the Cleveland market creates an environment in which cap rates can be quite favorable to investors.
UPSIDE POTENTIAL
The financial crisis that struck a decade ago hit the Cleveland real estate market HARD. And interestingly, despite the strong economy, higher incomes, lower interest rates, and higher rents, prices in most areas have still not yet fully rebounded to their previous peak levels (~2006), leaving room for considerable price appreciation upside.