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SoTre Properties finds a creative way to finance fixing rental units throughout Tremont

Posted at 3:07 PM, Dec 07, 2020

CLEVELAND — Construction is happening all over greater Cleveland, capitalizing on the region’s historic housing stock.

It’s no different in the Tremont neighborhood, where SoTre Properties has been turning a profit with a purpose for more than 15 years.

Residents say the community around Scranton and Corning is sometimes forgotten because it doesn't have a many restaurants and entertainment venues compared to the streets around Lincoln Park.

Walk down a Tremont Street with Eric Lutzo and chances are, he’s been involved in fixing up a home nearby.

“I sold this house last summer,” Lutzo said, walking along Corning Avenue.

Lutzo has renovated a handful of homes along Corning Avenue, including the green home in this picture.

“He’s kind of our one-man-renovation band, if you will,” said Tremont resident and Lutzo’s friend Sandy Smith.

Smith and Lutzo moved to Tremont right around the same time, roughly 20 years ago, and started planting flowers on their own property before branching out to create community gardens, making the streets look nicer.

The living area in one of Lutzo's apartments has original wood floors and a unique door that is slightly taller than modern doorways.

“Then a couple weeks later, somebody else would plant some flowers, and then somebody else would plant a tree, and then somebody else would paint their front porch,” said Smith, who helped write grant applications that made the community spaces possible.

“It gives a sense of purpose if you see beautifully-landscaped yards,” said Lutzo. “You know somebody that cares live there.”

One of Lutzo's properties on Corning Avenue.

Then, Lutzo got into fixing up homes too. Just one or two at first.

Eventually, he created SoTre Properties, standing for “South Tremont,” in 2004.

A few years later, the housing bubble burst and foreclosures were common all across Cleveland, and many communities ran the risk of having a large number of vacant homes in a short period of time.

Lutzo walking around a property he's fixing up and plans to turn into two more apartments.

“That was part of the pitch that I made to so many people,” said Lutzo. “I have to save this. This is our neighborhood. If I don’t get [foreclosed homes], who will and what will they do to it?”

A few properties to start eventually became 30, with 50 rental units all over the neighborhood.

“What makes a good property,” Lutzo said, repeating the question. “It’s in my target neighborhood.”

Lutzo says his renovations maintain the character of the homes they fix up while making them more attractive to renters compared to the rest of the market.

That meant Lutzo ended up with some homes that were in pretty rough shape and would need a lot of work before renters could move in.

“It was a [house] that we bought on the foreclosure market, and the agent took me through it and there was three inches of animal waste,” Lutzo remembered.

SoTre Properties creativity factors into the way Lutzo has financed many of his homes.

Many of Lutzo's renovations are initially financed by angel investors who lend money for three years because they believe in what Lutzo is doing in Tremont.

Roughly half of the properties were renovated with help from private angel investors. Those are people who have enough money to invest about $100,000 or more to fix up a home that isn’t theirs just because they believe in what he’s doing.

“And they’re like, ‘We love the fact that you’re saving these old homes. We love the fact that you’re building community. But more importantly, you’re stabilizing a part of the city the wasn’t on anybody’s radar,” said Lutzo.

"All of them have great tenants and that's so important because you can have the most beautiful house on the street but if the people you rent it to are not good neighbors, it really makes it difficult for everyone else," said Smith, referring to SoTre Properties' rental units.

Within three years, the renovation is done, renters move in, he refinances the rental property with a traditional bank loan, and gets the investor’s money back with interest.

The key to making his work more than just flipping houses is in the renovation work that Lutzo says goes beyond the bare minimum needed to rent again.

Features like vaulted ceilings and original wood floors might mean more upkeep, but it preserves the character of Tremont in a way he says others don’t.

Lutzo explains how a bathroom with a unique layout makes the rental unit special for the tenant.

“A good tenant creates a better community,” said Lutzo.

Smith says that shows other builders it’s worth working in Tremont and holds them accountable when they’re working near one of SoTre’s Properties.

“One street at a time, one block at a time, one neighborhood at a time,” said Smith. “That’s how you do it.”

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