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In a recent Wall Street Journal article*, “Cleveland Is a House-Flipping Hot Spot, and Covid Adds Fuel,” Ryan Dezember explains why real estate investors seem to be moving away from the Sunbelt to lower-priced areas, such as Cleveland.
Homeownership is at risk due to the financial crisis stemming from the recent pandemic, especially for certain groups like millennials, potentially presenting an opportunity for real estate investors to leverage rental properties.
“That’s where Cleveland comes in,” states Dezember. Equity Trust is headquartered in Westlake, Ohio, which is only about 18 miles west of downtown Cleveland.
Cleveland is viewed as a profitable area in the U.S. to fix and flip properties specifically, a strategy used by many investors who invest in real estate in their self-directed IRA. Dezember says the typical fix-and-flip deal done in the Cleveland area, as well as other cities around the Great Lakes, sells for double the cost, which is a big differentiator from the Sunbelt area.
“California property-investment adviser Kathy Fettke steers clients clear of the Sunbelt cities where Wall Street gobbles up houses and surging prices have squeezed margins, guiding them instead to northeastern Ohio,” states Dezember.
According to Zillow.com’s home value index, the median home value in Cleveland is a little over $68,000. The median home value for the state of Ohio is about $153,500. Compare this to California as a whole ($578,200), or even Sacramento ($362,000).
“Mortgage delinquencies doubled between March and April to nearly 3.4 million, according to Black Knight Inc. That could put more foreclosed homes on the market for investors,” says Dezember.
Whether investors are in Cleveland, or other housing markets impacted by COVID, a self-directed IRA allows individuals to use their retirement funds to invest in properties, such as fix-and-flips, apartment buildings, and more.