Is Cleveland the new Phoenix for wholesale houses?
Is Cleveland, Ohio, replacing Phoenix, AZ as the next popular and most profitable destination for wholesale houses?
Phoenix, Arizona, quickly rose from the ashes of the foreclosure crisis, attracting global investors and huge hedge funds looking to capitalize on discounts on bargain-priced foreclosed homes. This put the city firmly on the real estate investment map as one of the hottest markets for home remodeling.
Since then, some have claimed that the Phoenix, AZ market has been cooling off at a more moderate rate as private equity and pinball giants have stepped up and distressed inventory seemed to be shrinking sharply.
More recently, Ohio has featured frequently in real estate circles. Many are calling the state the next hot spot for wholesale home sales and a great option for out-of-area investors. So what’s so appealing about Ohio real estate?
Ohio has two big draws for real estate investors today. The first is the desire to seek greener pastures before the big private equity firms and hedge funds take over, jack up prices, create crazy bidding wars, and mop up the business market like vultures. While these deep-pocketed companies still focus on Atlanta and Chicago, Ohio cities like Cleveland could be open to smaller investors.
The second part of this is finding bargains. Southern California, New York and Miami may be recovering, but spreads and inventory have narrowed. According to a new report from Distressed Pro, Ohio banks had $2 billion in bank-owned REOs and tens of billions in delinquent residential mortgage loans in the third quarter of 2013. This presents one of the biggest opportunities for real estate investors anywhere. And certainly also some very important discounts and spreads. Some experts claim that homes here are still selling for 50% less than their previous highs.
What makes Cleveland in particular attractive to many investors from outside the area are the ongoing efforts by the city and county to turn the area around, keep property prices protected, and avoid becoming another urban wasteland. This means billions are invested in redevelopment, new checks and balances are put in place to protect buyers, sellers and investors and ensure contractors live up to their responsibilities.
The downside of this can be too many regulations and restrictions for some of those wholesale houses. Fortunately there are still deals all over the country if investors know how to look for them. Some Arizona analysts are even predicting the city is ramping up for round two and the biggest growth yet.