Friday, February 25, 2011

Cleveland Real Estate Speculation

Relocation decisions hinge on knowledge of place. We decide to move to another region primarily for economic reasons. Where we reside in that region is a matter of mesofacts. Because our perceptions of certain geographies are slow to change (if they change at all), there is a glut of arbitrage opportunities. You can find a quality residence in a quality neighborhood on the cheap.

Hi guys,

I was just speaking to my brother via skype a few minutes ago.
He's in Australia.

I tell him Im planning on doing a road trip to Cleveland to check out some properties.

I explain to him that there are properties there going from 35K and up. He's going to be a RE agent in OZ and he just freaked out when I told him. He just could not believe how low the prices were.

So then he asks me: "Why do you want to buy there? Who's gonna rent from you if everyone can buy?"

My only answer was that I assumed people in the area had bad credit?
Then I realized how bad that generalization was.

But can someone explain this to me? I guess he had a valid point. I guess vacancies are higher in those areas but since you can purchase at such a low price, its still worth it.
Who is renting these properties?


That message board poster is from Seattle. Rust Belt markets such as Cleveland are opaque places. People know very little about the neighborhoods there. The entire megaregion is a black box. Investment just about anyplace is a tremendous risk.

Now think about this from the perspective of talent. Even if you knew there were jobs available in Shittsburgh, would you move there? You would more likely go to Portland despite the high unemployment. That's the problem with Rust Belt cities marketing themselves as inexpensive places with lost-cost housing. Talent already understands this and continues to head elsewhere.

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