Who really wins in Cleveland’s housing market?

Cleveland’s housing market is changing fast; investors are cashing in, neighborhoods are shifting, and gentrification is creeping in. But where does that leave first-time buyers?

As investor capital floods in, the city’s neighborhoods are transforming. While some areas have benefited from revitalization, rising home prices – up 15% year-over-year – are making affordability a growing concern. For many first-time buyers, the dream of homeownership is slipping further out of reach.

The trend isn’t unique to Cleveland. Across the US, the share of non-qualified mortgage (non-QM) loans – alternative financing that caters to investors and self-employed borrowers – has increased from less than 3% in 2020 to 5% in 2024. This growth signals a shift in how properties are being financed, favoring investors who can bypass traditional lending restrictions.

Mortgage loan originator and real estate investor Eli Mongold (pictured) has watched this play out firsthand. With experience in private equity, commercial lending, and construction management, he’s been at the forefront of Cleveland’s evolving real estate landscape. He broke down who’s winning in this market – and who’s being left behind.

The investor advantage – and what it means for first-time buyers

For first-time buyers, affordability remains the biggest roadblock. Many rely on FHA loans and seller-covered closing costs just to get a foot in the door. Financing renovations? Even tougher.

“They don’t have the ability to do the renovations that are required to fully update the neighborhood, update the properties, and get the cities to maybe pump a little bit more tax dollars into it,” Mongold said.

Local efforts are trying to curb affordability issues. The Cleveland Housing Investment Fund (CHIF), backed by a $38 million commitment, aims to support mixed-income housing and homeownership programs to offset the investor-driven boom. The "Residents First" legislation was also made to prioritize local buyers over outside investors for vacant and foreclosed properties. But are these initiatives enough to get these properties into these first-time buyers’ hands?

This is where investors come in. They’re taking on the financial burden of revitalizing neglected properties, raising the long-term value of these neighborhoods. But in the short term, they’re also driving up prices, making it harder for buyers to compete.

“At the end of the day, it’s better for first-time homebuyers,” Mongold said. “[They] will succeed in five years, when a lot of these private equity firms leave.”

This tension plays out in how financing is structured. Traditional mortgage lenders require tax returns and employment records – standards that don’t always work for real estate investors. Non-QM loans have stepped in to fill that gap.

“The intelligent real estate investor is rich in their bank account and dead-broke on paper,” Mongold said. “With the kinds of loans that we broker out, they’re effectively just bank statement loans.”

It’s a model based on the strength of the deal, not the borrower’s W-2. And while some draw comparisons to 2008’s risky lending practices, Mongold pushed back on that idea.

“It’s almost a cry back to 2008 where, you know, it’s no income, no job,” he said. “But the difference now is that we care more about the deal than we do about the person. It’s a very, very different underwriting process.”

That process is helping investors secure funding for properties that banks won’t touch – often in the same neighborhoods first-time buyers are trying to access.

The bridge to DSCR strategy: How investors stay ahead

Investors aren’t just buying homes – they’re executing a carefully structured strategy to maximize returns. It starts with short-term bridge loans and ends with long-term financing, all without relying on traditional banks.

“A lot of people call it the BRRR method; we call it bridge to DSCR,” Mongold said. “They take the property down, they get them up to a point where they can be lended on in these neighborhoods requiring revitalization, and then they can come back to me in three to six months afterwards and say, ‘Hey, we’re all ready to go. We have a tenant in it. Let’s refinance this. And move on to the next thing.’”

It’s a process that allows investors to operate in areas traditional lenders ignore.

“Permanent lenders, you know, the 30-year fixed people, they don’t want to put loans on these properties, because a lot of them need a decent amount of work just to get them habitable,” Mongold said. “So that’s where we come in.”

And the demand for this kind of financing? Exploding.

“Last year, we averaged about $5 million a month in loans,” Mongold said. “This year… we’re up to eight and a half million so far, on average, a month that we’re doing.”

Out-of-state investors, many structuring purchases through LLCs, are fueling much of that growth.

“They just come to us with an LLC with a foreign qualification here in Ohio, and we’re able to turn around and get them the loan that helps out a lot,” he said.

Even foreign nationals – especially from Canada and Israel – are leveraging these loans.

“We make foreign national loans way easier,” Mongold said.

What first-time buyers need to know

First-time buyers may not be aware of just how much the lending landscape has changed. Mongold emphasized that education is key – because in a market dominated by investors, understanding financing is more important than ever.

“The number one thing is helping them understand the difference between non-QM and QM mortgages,” he said.

Unlike traditional loans, non-QM lending is all about the deal itself. That means buyers – especially investors – need to know how to analyze properties before they even apply for a loan.

“So, loan-to-value caps, DSCR requirements, how to solve for those things on their own,” Mongold said. “So that way, when they get a property under contract, they feel confident it’s lendable.”

For first-time buyers, that means adjusting their expectations. Investors have the upper hand right now, but that doesn’t mean there aren’t opportunities – if buyers learn how to navigate the new market reality and play the long game.