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Should the Cleveland OH Point of Sale Process Scare You?

Posted on: October 12th, 2019 by , No Comments

Looking to buy an investment property in Cuyahoga County (Cleveland, OH)? Well you are definitely not alone.

cleveland oh sign cleveland oh point sale POS

Investing in Cleveland, OH for cash flow

Why Invest in Cleveland, OH?

As real estate markets in other states heat up more out of state investors are looking for cash flow markets to invest their money. One of those markets is certainly Cleveland, OH.

The Cleveland area is a great market to find investment properties for low dollars (relatively), while also having strong rental demand and rental returns. The market is very active with investors, both for buying and selling properties.

The Cleveland area is a great market to find investment properties at low prices (relatively), while the city also has strong rental demand and rental returns.

Whether this is your first investment property in Cleveland or you have bought several there are definitely some factors that you as an investor should know about the Cleveland market.   You should take these into account when making an investment decision. One of those things that is concerning to Cleveland investors is the Point of Sale inspection process. Many cities (although not all) in Cuyahoga County require a point of sale (POS) inspection prior to the sale of a home.

What is the Cleveland OH Point of Sale? Why Shouldn’t I Avoid It At All Costs?

What is a point of sale?  Is a POS necessary in the specific Cuyahoga city you are thinking about buying your investment property? Read on to find out what POS is and if your target city is included.

What is a POS? In a nutshell a POS is a process that ensures that homes are kept up to the city’s aesthetic and safety standards and that they meet code. The city also uses the POS process to deter investors from buying up properties and running them into the ground, aka not fixing anything (#slumlording) in order to maximize their returns.

 

A high level overview of the process follows. When a seller is thinking of selling their house they order a POS inspection with their city if required. The city will do an inspection and produce a list of items that need to be addressed/fixed upon sale of the property. The repairs need to be made by the seller prior to the transfer of title or assumed by the buyer upon sale. Once the house is sold the repairs that were documented on the POS inspection report need to be completed within a certain amount of time, which varies by the individual city requirements.

Every city’s POS process is somewhat unique, but in general the city requires that the funds needed to make the repairs be put into an escrow account either by the buyer or seller (determined by the agreement between them). Sometimes the escrow account is 100% of the estimated costs, and sometimes it is a factor greater than 100% (ie. Shaker Heights, OH POS requires 150% escrow hold). Depending on the specific city the POS funds placed into escrow may be held until after a successful inspection (ie. University Hts POS) or the money may be held in escrow but drawn upon as the work is completed (ie. Shaker Hts POS).

Some of the more popular Cuyahoga county cities for investments that have a POS process (as of the date this was published) include (but are not limited to) Bedford, Bedford Hts, Berea, Bratenahl, Brooklyn Hts, Brook Park, Cleveland Hts, Cuyahoga Hts, Euclid, Garfield Hts, Lakewood, Maple Hts, Newburgh Hts, Shaker Hts, and University Hts.

One of the benefits of investing within Cleveland city limits is that there is no POS in the city of Cleveland. So why don’t investors just invest inside Cleveland city limits you may ask? Many times investors prefer to invest outside of the city limits because of safer, more desirable neighborhoods with houses that have better potential for appreciation and are more desirable for homeowners and renters alike.

For sure, the POS process is an extra headache.  It surely creates an extra step (or steps), and it may even cause a financial burden that deters some investors from investing in POS cities.

With that being said, there are some benefits of the POS process.  The houses in a community that has a POS theoretically remain in better condition. As a result the property values remain higher because the neighborhoods are more desirable (or at least look more attractive). As an investor the POS can ultimately help you by ensuring that your property, as well as the properties in the city, continue to look good and are safe for renters and homeowners.

If you want to buy an investment property in one of these cities with a POS process, don’t let the thought of the POS process alone scare you away.  Sometimes better investments take more work (sometimes?).  Remember, once the POS process is completed it does have benefits that will serve you well after completed.

Talk with individuals who are familiar with the POS process, specifically in the cities you are targeting.

If you purchase an assignable contract through Sesa Properties, we can walk you through the process for each POS city and even help you find a contractor that is approved by the city.

To learn more about the Cleveland, OH market, off market investment properties or Sesa Properties visit us at www.offmarketcle.com.

 

Sesa Properties, Off Market Real Estate Investing Cleveland, OH

Sesa Properties, Off Market Real Estate Investing in Cleveland, OH