Show Summary

Every landlord or rental property owner has to decide what ‘class’ of houses they’re going to focus on. Today’s guest, Joe Lieber, loves the low end stuff. There are pros and cons to each class of properties, but Joe tells us the benefits of operating in the C and D range, as well as how he got there. Don’t miss this FlipNerd.com Expert Interview.

Highlights of this show

  • Meet Joe Lieber, real estate investor, rental property manager and cash flow lover.
  • Learn about different classes of rental properties, and why Joe prefers the low end stuff.
  • Join the conversation about why cash flow is king, and how you should take this into consideration with your portfolio.

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Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Welcome to the FlipNerd.com podcast. This is your host, Mike Hambright. And on this show, I introduce you to expert real estate investors, awesome entrepreneurs, and super cool vendors that serve our industry. We publish new shows each week and have hundreds of previous shows and tip videos available to you. All of which you can access by visiting us at FlipNerd.com or visiting us in the iTunes store.

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Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting VIP interview where I interview successful real estate investing experts and entrepreneurs in our industry to help you learn and grow. Today I am joined by my friend, Joe Lieber. He is the President of Real Estate Quest, which is a full service brokerage that specializes in investment properties in the Cleveland area.

So Joe has purchased more than 700 houses and is now working with national and international buyers that buy turnkey rental properties in the Cleveland market. Joe and I are actually in a mastermind together and Joe is a very highly respected rental property expert. In fact he is the king of the cheap stuff. All investors that own rental properties, ultimately you have to decide what level or class of property you’re going to own and that you want to operate or even manage, if you manage your own. Joe is actually the master of the ghetto. He is going to tell us some more about that and he is going to tell us why he loves cheap houses and why they make sense for him.

Before we get started, though, let us take a moment to recognize our featured sponsors.

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Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Now, let’s start today’s show.

Hey, Joe. Thanks for being on the show.

Joe: How are you doing, Mike?

Mike: I am good. I’m happy to have you on. We’ve been talking about having you on for a little while and we finally got you out of the ghetto to jump on the call here.

Joe: Thanks. I appreciate it. It is good to be out of the ghetto for a little while.

Mike: Yeah. You’re in a safe place now, my friend. Awesome. It is interesting because we have had guests on before talking about, we talk about rental properties, about building long term wealth, about all the things associated with rental properties. We haven’t really talked a whole lot in comparison of why somebody would choose what we would call kind of an A class property versus a B, C, D, or F, and those are fairly obscure kind of levels. But when you get down to kind of the D level you know where you are at.

Joe: Sure.

Mike: But there are certainly pros and cons of every level and everybody has some justification for their strategy. So it is going to be interesting to pick your brain and learn more about why the cheap stuff makes sense.

Joe: Great. I’m looking forward to talking about it today.

Mike: Yeah. Before we get started, why don’t you tell us your background, how you got into real estate investing, and a little bit more about you?

Joe: Well, I am sitting there at graduation. It was a hot June day-

Mike: Was this college graduation?

Joe: High school.

Mike: High school graduation. Okay.

Joe: A hot summer day in Cleveland and I’m sitting there getting ready to graduate high school. My buddy looks over at me in his cap and gown, I will never forget it, and says to me, “Hey, man, I’ve got a job. I start next week in construction.” I am like, “Wow, that is cool.” He goes, “Yeah. Even cooler, I am making $20 an hour.” I’m like, “No way, man.” He is like, “Oh yeah.” I couldn’t believe it. To me at 18 years old that is all the money in the world. I was very envious.

So this friend of mine gets his job and I thought, “Jeez, what can I do? I want a job like that.” No, there were no positions available. I don’t know if he just didn’t want to get me a job there or they didn’t have any positions, so I did the next best thing. He was an impressive guy, wanted nice things and to have a better life, so I said, “Let’s go out and buy a house, we’ll fix it up and flip it. You have got the big pay stubs so we can get a bank loan. So it will be great.” So we did that.

We went out to a local suburb here in Cleveland called Lakewood, Ohio. We bought a house, we fixed it up, and we didn’t sell it. Eighteen months later I am carrying a $5,000 balance on my student Discover card. My parents are saying to me, “What in the hell is wrong with you, boy? You don’t know anything.” They were right, I didn’t know anything. I actually sold that house 18 months later to a wholesaler, lost $4,500 which, when you are 19 at this point, it was all the money in the world.

Mike: That was a lot of money.

Joe: Oh, it was everything, but that was probably the best education I had ever gotten. I wouldn’t stop, for the trials and tribulations at the school of hard knocks, for the last 17 years I have managed to kick, claw, and climb my way to the top of the real estate investing market.

Mike: Yeah, so talk a little bit about where you went from there. Did you continue to invest at that point? Did you then go do something else for a while?

Joe: Well, because I didn’t have any money or a job for that matter, I was trying to play college hero and make my parents happy, I met a real estate broker at that time who thought, “Wow, you’re 19 at this point and you went out there and really just did it. You jumped in with two feet with no training, didn’t know anything. Why don’t you come work for me as a real estate agent? It will give you the opportunity to learn the real estate business and make yourself a little bit of money.” “That is a great idea. I think I will.”

So I went and did that for about a year and a half, two years. I worked with an agent [inaudible 00:06:57] broker here and it was a great experience. I learned how to really process a real estate transaction, bank financing, appraisals, all the things that a real estate agent would need to know, and it started setting up the rest of my career.

Mike: Yeah, then from there you just branched out on your own eventually?

Joe: It didn’t really go like that. You see, another pivotal point there, I’m sitting at my desk trying to play real estate agent and I was going to college. I didn’t know what I was going to do, and the phone rang from a friend of mine who I had graduated high school with. I hadn’t seen him since we graduated high school, probably 21 at this point. He calls me up and says, “Hey, man. I am relocating back to Cleveland. I moved to Michigan. Let’s get together and play some golf and have a beer.” I am like, “Yeah, sounds great.”

So my friend I haven’t seen since I was 18 pulls up in a nice car, dressed well, and I was like, “Gosh, man. What are you doing?” He’s like, “Well I am a loan officer.” I said, “Oh, okay, that is nice. Maybe we can do some business together.” So a few weeks pass, we started hanging out a little bit more, and I saw that my friend lived well for a young 21-year-old man. I was like, “Gosh.” As a real estate agent in Cleveland I wasn’t burning up the Earth here, okay? There wasn’t a lot of money being made.

So I asked him one day, I said, “Bill, you live well. What’s going on here, man? Is loans that good of a business?” He says to me, now we are 21-years-old, he says to me, “Joe, I made $120,000 last year.” No way, that is not possible, right? So I asked him, “Let me see your W-2.” I’ll never forget he pulls out a W-2 to me. It says on it, it is burned in my brain. The year was 1999, his W-2, and it said, “$119,768.”

At that point I said, “I need to get a job as a loan officer.” So for the next three years I was a loan officer. I was a good one. I wasn’t a great one. I was pretty good at it. I made more money than as a real estate agent, but I just knew that things were going to change, and every dollar I made as a loan officer for that three year period I invested back into real estate investing. I would buy these cheap houses primarily because they were low down payments because I would finance myself. I started doing the 80/20 loans, stated income, or 5% down. So I would use just a little bit of money and I would buy these houses.

I got up to about 20 of these things and one day everything changed. I’m sitting at my desk, this was around the summer of 2003, and bank representatives would walk in from different banks. They would always try to get your loans. That’s how the loan business was 10 years ago. He said to me, it’s one of those pivotal moments that changes your career, he says, “We do land contract refinances, stated income, stated assets down to a 580 score.” This light bulb goes off right there. I said, “Jeez, I’m going to try to get my tenants loans on these houses and cash me out.” I did just that.

I started writing loans for my tenants. So I started selling those 20 houses and I was making these huge spreads, $20-30,000 a house, and I would just keep reinvesting that money back in. But the light went off. I got really tired of sitting there writing loans. It is a mundane type of business, was just repetitive, and I was like, “I need to make the switch to real estate full time.” In 2004 that was when I became a full time real estate investor.

Mike: That’s awesome. What made you decide to refinance and kind of sell off your houses versus, I guess in the first place were you investing for the long term?

Joe: Well, I was at that point. I was all about cash flow as I have always been, but I saw an opportunity to make $30,000 a house and I thought, “I can really turbocharge this and go from 20 houses to 60 or 80 houses.” That is what I did. Now, I have got to add in there though, because people are going to ask, “Joe, how did you get so many loans?” The answer, in those beginning years that 2003-2007 year was, I incorporated my parents into getting loans, my brother, even my grandparents owned 10 houses.

So that is how I was able to acquire that first 60 or 80 houses. I just brought the whole family in, I would bring them in as 50/50 partners. “Mom and dad, let’s get a loan, put the loan in your name, we will be 50/50 partners on this house,” kind of thing. That’s how I was able to acquire about 60 or 80 houses at that point.

Mike: Yeah, that’s interesting. It has always been interesting, obviously the rental finance market has come back in a big way with the likes of B2R and some of the other guys out there that just love financing rental properties which, you and I have been in this business long enough to where we know that is unusual. That is a new phenomenon where people want to finance you as a landlord or as a property owner.

Joe: Yeah, it is. It’s very hard. You know what I started doing too, Mike, is in the recent years I started raising private capital. I have always [inaudible 00:12:14] everybody says they get mad at me for saying this, but I would borrow $100,000 blocks on a five year AM at 15%. When you are willing to pay 15% interest, you wouldn’t believe how many calls you get of people wanting to give you money. It is amazing, so I do a lot of that now even for, just to buy more deals instead of going to the banks for traditional financing. It is so much easier to get a phone call from your doctor buddy and get $100,000.

Mike: Yeah, absolutely. Awesome. We have a lot of joint friends and stuff like that. There are a lot of turnkey opportunities, a lot of people focused on buying rental properties in the Midwest right now. It is kind of like the untapped land for rental properties, right? Lots of California money or out-of-state money that can’t believe you can buy a house for what you can buy them for in the Midwest and that they can cash flow and provide some of those ROIs that they just can’t see in their markets. They don’t even believe it is possible. So you have been doing this for a long time, before it was cool, right?

Joe: Before it was cool.

Mike: Yeah. It is interesting because I know, when I first started buying rental properties six years ago or so I heard somebody say something that at the time I thought was really wise. They said, “I focus on kind of a B class property,” and they said it because “Some day I want to harvest them and I don’t want to have to sell them to a guy like me,” meaning a real estate investor that is going to want to buy at a deep discount. So he is like, “I want them that at some point I can rehab them and sell them on the retail market for full ARV,” and that really stuck with me for a couple years.

Then what happened was we started to, just because of the business we’re in of buying houses directly from sellers that are calling us for leads, we tend to get a lot of lower level houses, C class and below. So I was like, “Man, I really would like to, these things, look how well this would cash flow on paper if the numbers work.” So we kind of moved downstream to more of the C class level and I got out of my head that I’m worried about harvesting them ever because in my mind, why would I ever want to sell it if the cash flow is like that? Then what hit me one time is, I was wholesaling a house to somebody that, this was a dump. This was just a shack, like one of those houses that you feel like maybe if you put $40,000 into it would be worth $40,000. It was only a two bedroom, one bath, not great from at least a lot of people’s view on rental properties.

I was talking to the guy, “What else do you buy? What level do you guys tend to buy at?” He was like, “We like the F class.” I had never even heard that come out of anybody’s mouth before. I don’t even know what an F is, but I guess this is one of them. So it was just kind of funny. He was like, “Yeah, but they just cash flow so well.” Of course, houses are like people. There is someone for everyone, there is somebody for every house type out there.

It is a strategic decision as a property owner, right? What level am I going to kind of operate at? What makes the most sense? Then you have to have effective management at that level, right? So I know that you like stuff that is kind of in the C and D range, that is not, I don’t want to put words in your mouth. You can kind of tell us what you focus on, but then after you tell us that, talk a little bit about why you buy at that level and why that makes sense for you.

Joe: Okay, good. Well, being here in Cleveland, there are cheap properties everywhere. The reason, I guess, why I buy these houses is they’re cheap. Someone has got to buy them. I am going to do some examples, okay? I am going to base this off the Cleveland market because I can’t speak for these other markets. I have so much concentration here. I can buy a house for $25,000-35,000. So let’s use that price point, $25-35,000. That’s going to rent for, we’ll say $800 monthly, to where if I bump up to $80-100,000, the rent is not going to change much, $900-950. So why would I want to spend $80-100,000 to get $900-950 in rent when I can spend $25-35,000 and get $800 in rent?

Mike: Yeah, and have three of them.

Joe: And have three of them, yeah. I can triple my cash flow for the same amount of money invested. The other thing you are going to say is, “What about depreciation?” Look, I don’t care what part of Cleveland you are in, 3% a year is what you are going to get, for the most part. I am throwing some random numbers out there, but if I have a $25,000 house or a 250 house you are going to get 3% appreciation per year. That is just what it is, so I prefer to hedge as much of my money as possible and buy as many houses as I can because I’m all about cash flow. So that is why I have kind of found a niche right in that price point, that $25-35,000 price point to be my niche.

Mike: Yeah. I know one of the things that obviously comes into play is, when we have kind of gone downstream in terms of lower level houses, lower house values, not to say this in a negative way, but you tend to start to get a less reliable tenant, let’s say, and somebody that is maybe more transient, maybe certainly living kind of more check-to-check than somebody at a level above that, might be somebody that is more prone to do damage to the house. When you turn it over you have got higher make-ready costs. Just talk about how you kind of balance, first of all, do you agree with that?

Joe: I absolutely agree with that.

Mike: But it also ends up becoming an equation, right? “Okay, I have more of these expenses, but the cash flow is so much better, and therefore I offset it.”

Joe: And it is, correct. Well, one of the biggest things is, and this is what I had to learn through my 17 years of doing everything wrong, was that I used to rehab these houses, make them nice. I would paint the walls, carpet, make them nice, and I would move people in, and like you said, they are transient. After 9 to 18 months I would have turnover and then I would see, because I gave them a nice house and let them without a security deposit, they weren’t vested. They didn’t care. They didn’t care how they treated my house. They didn’t care how long they were there. They would mess it up and move on to another one.

So I had to figure out a way to get my tenants vested. How was I going to do that? Well, there are two ways I came up with, Mike, to get them vested. One is working in the house. You have either got to work in the house and sweat equity this place or you have got to have a big down payment. Money, if you put down money, you’re vested. I use the example of myself. If we went and bought a new car today and put half down and financed the other half, are you going to go default on the payments?

Mike: No.

Joe: Probably not. So I try to relate that concept to real estate. This is what I have done. I’ve done a little bit of both.

Mike: And for down payments are you saying, if it is just a straight tenant are you talking about a deposit?

Joe: Well, that is what I have changed. I don’t rent houses anymore. I only do rent-to-own. I will only do rent-to-own properties because I need to get my tenant vested. I vest them by not doing any work to the property and letting them come in with a minimal down payment and do the work themselves. I will do three things. I turn on the heat, the water, and the lights. So it’s ready to go. It is habitable.

Now you’ve got to come in and clean it, you’ve got to paint it, you’ve got to put carpet down, you’ve got to cut the bushes, you have got to cut the grass. So I’m vesting them to the property. So right now, just hit those numbers at you, I am getting like $1,500 down, say $750 a month in rent, and I am giving them a house that just has heat, water, and lights on. It needs paint, it needs carpet, it needs cleaning, it needs landscaping.

Mike: So effectively these are lease options?

Joe: They are all lease options.

Mike: Okay.

Joe: And then you’re probably going to ask me next about my conversion rates. [inaudible 00:20:17] you don’t want to sell the house. Well, I want to help everybody become a homeowner. That is the idea. I hope they do. It is win-win if they do buy the house. They win because they become a homeowner, which is awesome, and I win because I cash out of it. Obviously we’re going to cash out at a profit. We all know that. Unfortunately, I say unfortunately, since 2007, since the bubble burst and financing got tight, I have not had one person come through and exercise their option. I have probably written over 600 leases, rent-to-own-

Mike: Wow, and that is because ultimately they’re probably the type of person that is not going to be able to get a loan.

Joe: Correct. They are really unfinanceable. If something changes in their world, and I wish it did, but unfortunately in the past eight years now, that has not happened one time in 600 leases. Really I’ve got a bunch of rental property that I have them vested to, is what it really is.

Mike: Sure. I should tell people, too, lease options, there are all sorts of different laws in different states and stuff like that, so find out what you can do in your market because not every market you can do lease options. But in principle you are basically telling people “Hey, you have the opportunity to buy this house or refinance you out if you want to at a certain price.” I guess you probably determine that up front.

Joe: We do. We allow them to determine up front, and then sometimes we just say, “Listen, at the end of this we’ll get an appraisal done and we will negotiate from there.” I really don’t care. I’m dealing with such volume. If I can actually make somebody a homeowner, I’m going to do that. I’m ready to leave a couple bucks on the table to make somebody a homeowner, it honestly makes me feel better. It is like a couple thousand dollars.

Mike: Yeah. So since you switched from more of a rental property model, do you find that people are taking more pride in being a tenant and staying longer and things like that?

Joe: Absolutely. I’m getting better tenant retention. My service calls, Mike, I was spending $10,000 a month on service calls and general contracting. That got cut to a third of that. Sure, do I still get furnace calls? Absolutely. Will I still help them out? For sure, but now instead of me knowing I am getting the service call, now I’m making deals. So when the call comes in and says, “Joe, my furnace isn’t working,” the call usually starts off with, “Well, you know you’re responsible for that furnace, right?”

Then they will say, “Well, I don’t have the money for it.” “Okay, well here is what we can do. I can send a service person out. Can you split it with me 50/50?” “Well, I don’t have that.” “Well, can you make payments to me? Can I finance the service call back to you and you pay me $50 a month?” Anything I get is better than me paying 100% of the service call like I was before. So if that person pays for four months on a service call and it’s not paid, I’m not going to chase out a good tenant. Whatever. I was going to pay 100% of it three years ago.

Mike: Right. So talk a little bit about, you obviously don’t keep properties at the A level or even the B level, but just talk about how, and some of this probably doesn’t compute to you. “Why would anybody ever keep a house at the A level? I don’t know. It doesn’t make sense.” Maybe just talk about how people that are listening should think through this. Does it make sense to have an A level property? They probably don’t cash flow as well, but maybe there is more opportunity for appreciation. Maybe the make ready is less and the turnover is less. Just go down kind of A, B, C, D. As you kind of go up and down that ladder, what would justify that or how should people think about that?

Joe: Here’s the thing, Mike. I actually do a few A and B properties. Very few, less than 10, but here is my experience with them. I had them a long time and I’m trying to go at an A level property right now in my portfolio. The tenant group, I have had the property over 10 years. So the tenant group that I’m getting, they are executives, but they are usually here on a contract. So they will come for two years, then leave, and then I’ve got to find a new executive. And then I have four months of downtime, so I am trying to find the person that can pay $2,500 a month in rent in Cleveland, which is high. So my holding costs are much more.

Their demands are much more. I can’t give them a dirty house. They want me to run minute maids through the house that have it perfect before I give it to them. Their expectations are higher. Painting and carpeting a 5,000 square foot house versus painting and carpeting a 1,000 square foot bungalow in Cleveland is a big difference. So the cost of poker goes up. It’s really expensive. I have done it. I don’t think the cash flow is as great there. I will have $250,000 invested in a property at $2,500 a month in rent on the high end when, if I invested $250,000 in low income housing, my cash flow is probably going to be two to three times that. It’s not necessarily less work or more work. I have seen the same amount of work whether I am dealing with higher end or lower end houses.

Mike: Yeah, and I think there are some people, too, maybe you could talk to the management part of it. Now, your model is a little bit different now. You’re basically putting people in a situation where they have to take more personal responsibility.

Joe: Correct.

Mike: Imagine that. It’s good for you and it has helped, but let’s say people that maybe just own straight rental properties, some people don’t want to, they may be willing for example to manage their own properties if it was the B level because maybe their justification is, “I can relate to that type of tenant more than a C or a D class.” But just talk about some of the complications and differences of managing tenants at each of those levels.

Joe: Sure. I manage my own properties, so I am in control of the ship. So I’m a great person to ask this question to. There is a difference when handling tenants from the A to D class property because their expectations are different. Somebody in an A class property is going to be way more picky about something than someone who is in a D class property. You can kind of talk your way around things with the lower income clientele where an A property player is not going to stand for the slightest thing that’s not-

Mike: A burned out light bulb somewhere.

Joe: Right, exactly. So yeah, it’s different. Let me think about this question again, Mike, and bear with me.

Mike: You could talk about maybe even collecting rent. It obviously might be more complicated at the lower levels. Maintenance, which you have kind of solved some of those by doing a lease option model, but just talk about some of the pros and cons at the different levels.

Joe: All right. Rent collection, it’s easy. It’s just the system. Nobody can get mad at me because it is just the system. So here is what we do. We use the US Bank rent collection system. US Bank is the only bank in the country that I’m aware of that will show you a deposit ticket along with the rent and the time of the deposit.

So if Mike Hambright rented from me, he would go make his deposit today. Within five minutes I’ll be able to look online and see if Mike made his payment. They’ll show your name and your property address, and it is done. So I’m not waiting for checks in the mail, I’m not waiting for someone to bring cash to my office. It’s immediate, and they can use any US Bank location in the country, which works awesome.

Mike: Yeah, and you just require that.

Joe: Yeah, require that. You have to look at it as, it’s a business and a system. That is what I tell my tenants when we sign them. Look, it is not you. I don’t even need to know your name. I need to know your property address, because if your rent is not in on the first we are going to give you a 10 day grace period. I’m okay with that, especially in low income. I am going to call you on the 10th and ask why your payment is not there, and I’m not going to bother you again. That is it. On the 15th I am going to give you a three day notice. On the 23rd I am going to file an eviction against you. You can be caught up at any time. You’re just going to pay as we go.

After the 15th you’re going to pay a $50 three day notice charge, after the 23rd you’re going to pay a $150 filing fee, and we just keep going and going. I’ll reinstate you at any time with no arguments and no yelling. It is just really simple. I tell them straight up, I put it in writing, I show it to them. It saves a lot of stress and a lot of arguments.

Mike: Yeah, awesome. Talk a little bit about what is going on in the Cleveland market in terms of investing. Like we talked about, there is a lot of activity going on in the Midwest with people buying rental properties, especially in markets like Cleveland and some of the larger markets. What’s the population of Cleveland?

Joe: Two million.

Mike: Okay, that is a pretty good-sized market.

Joe: With the suburbs.

Mike: Talk about kind of what is going on right now over the past couple years. It feels like there is a lot more turnkey activity going on.

Joe: Well there is. There’s not just great real estate deals being done. LeBron James is dunking balls left and right here on TV, too. I feel proud of myself. That has been a huge push to our city. Everybody knows here in Cleveland that there are great deals right now, and people are buying here. It is causing the prices of, especially the lower-end real estate to rise. That $25-35,000 price point is starting more to lean now to the $35-40,000 price point because everybody is coming here.

Where in the country can you put up $35,000 and get $800 a month in rent? Outside of Michigan and Ohio, those are really all the places I’m aware of, you know? There are some wonderful deals up here and people are buying here, craziness. There are a lot of things going on in the city right now, a lot of new construction. We’ve never seen that in Cleveland before. So there is new construction going on and people are coming here in droves. Turnkey is getting popular here. I’m starting to do turnkey it is getting so popular. Yeah.

Mike: So in turnkey and the service that you are offering to some folks now, I know you’ve done it a lot with people that you know that are investors in other parts of the country that want to buy there, but talk about your model and maybe talk about if folks are interested in getting hold of you to learn more where they should go.

Joe: Perfect, I appreciate it. The turnkey model that we’re doing is, I am doing the work-for-equity that we discussed on this podcast as well as, I’m doing a Section 8 thing where we are buying the properties. I love Section 8. It’s a great model, it takes the edge off for investors because it is a direct deposit right into your checking account, and the people, the myths, and at some point, Mike, we’ll have to talk about debunking the myths to Section 8 because everybody says, “Oh, they’re going to destroy my property.” No, you’re absolutely wrong. Out of all my tenants, my Section 8 tenants are the only ones that call me Mr. Lieber. They’re so appreciative to be in these homes that they do not destroy my properties. They actually keep them better than some of my work-for-equity tenants do.

So I’m doing a lot of that with turnkey investors because it takes the fear away that I’m not going to get the rent next month and then I’m finding a trashed house. We sell a turnkey product that has a new roof, window, siding, gutters, kitchen, bath, furnace, electrical. We put the Section 8 tenant in there and Section 8 typically pays higher than a private pay would, so it’s a very lucrative opportunity for the investor and for the provider turning that product out.

Mike: Okay, so talk about the service that you, you run a brokerage. Talk about your brokerage for a second.

Joe: Right. What we would do here as part of our service is, I have these homes in our portfolio, or homes that we’re acquiring that are just for the turnkey model, people who want to invest in Cleveland at a hands-off experience, and we set them up with property management and we get them one of these turnkey products where everything has been done, we have the Section 8 tenant in place. It’s running like a well-oiled machine. It’s just all done for you and usually the Section 8 tenant stays a very long time.

There’s a huge demand for it here in Cleveland. I think there are 14,000 voucher holders just in our county, which is Cuyahoga County, and there’re not anywhere close to 14,000 houses available right now. So it’s a wonderful product if someone wants to get involved in a Section 8 model. If you wanted to reach me and talk about it, I can give you some phone numbers. You can call me here at my office. Feel free to call me direct. We’ll talk. It is area code 440-387-4800. I’m at extension two and my email is REBroker216@gmail.com. Those are probably the best ways to contact me.

Mike: Awesome. What is the name of your brokerage, Joe?

Joe: It is called Real Estate Quest.

Mike: Okay, awesome. We will add that information down below. Any last minute tips, Joe, on folks that are looking, maybe those that are interested in either getting started in real estate investing from a buy-and-hold standpoint or interested in maybe checking out the Cleveland market?

Joe: For sure. Get started. Don’t wait. The longer you wait the prices are going up. If you would have called me a year ago I could have delivered that product to you for $25,000. Now it is $10,000 more. So don’t wait. At 19-years-old if I had waited until I had money to invest in real estate, I would probably still be waiting to invest in real estate. So just get involved. Jump in with two feet. If you want to come to Cleveland, a lot of people do, just give me a buzz, fly on in, we’ll hang out for the day, roll around, look at houses, have a good time, go to dinner.

Mike: Awesome. That’s great. One of the things that people need to think about, too, when you’re looking at investing in certain markets, or investing at all, is how the price of those houses compare to the build cost, right? So where I’m at, let’s say even where you’re at, I am sure the build cost on those types of houses, which they don’t build anymore, is probably at least $70-85 a square foot, right?
Joe: At least.

Mike: Yeah, so you’re buying them at half of that. So they’re not making, those neighborhoods are rental neighborhoods now and they always will be, and they just don’t make those houses anymore. The thing is, with all the inflation that is going on, despite what the government tells you, especially in building equipment and building products, prices are just going to keep going up. So basically the build price is going to continue to go up. You can’t build houses like that anymore and people need a place to live.

Joe: They do, I agree.

Mike: Awesome. Well, Joe, thanks for joining us today. I appreciate it, my friend.

Joe: Thank you.

Mike: Yeah, and I’m going to see you at CG in just a couple weeks here.

Joe: I look forward to it.

Mike: Awesome.

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