Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
Hey guys,
I am looking to buy my first rental property within the next year. I've been researching quite a bit the past few months to learn about the different factors involved when evaluating properties. I came across a listing in Cleveland, OH which interests me. Can you please give me any insight on this property?
http://www.loopnet.com/Listing/20265820/7102-Grand-Ave-Cleveland-OH/
Thank you in advance! Eager to hear your thoughts!
Best,
Bhavik
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
9y
Hi Bhavik,
They did not include any maintenance expenses which should be ~ 10%.
Insurance seems high at over $450 per unit
They also assumed 100% occupancy which is unlikely over any reasonable amount of time so cut another 10% of the income.
Property taxes are based on the current valuation so will go up in due course by the county.
Note that the income works out to ~$450 per unit per month; not exactly a high end rental even if they are all (doesn't even tell you) 1B / 1Ba units.
I do not think the property would perform as the agent is representing and would pass.
A couple of other points to consider;
- Property management: Needs to be fully vetted. You are out of state and managing remotely can be challenging. BP has many people that do this successfully but not for everyone.
- The other thing that struck me was the broker is based in FL (bottom of the Loopnet post and click on the link to all their other listings). Where / how did they get this listing and what do they really know about the property.
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
9y
Hi Bhavik,
They did not include any maintenance expenses which should be ~ 10%.
Insurance seems high at over $450 per unit
They also assumed 100% occupancy which is unlikely over any reasonable amount of time so cut another 10% of the income.
Property taxes are based on the current valuation so will go up in due course by the county.
Note that the income works out to ~$450 per unit per month; not exactly a high end rental even if they are all (doesn't even tell you) 1B / 1Ba units.
I do not think the property would perform as the agent is representing and would pass.
A couple of other points to consider;
- Property management: Needs to be fully vetted. You are out of state and managing remotely can be challenging. BP has many people that do this successfully but not for everyone.
- The other thing that struck me was the broker is based in FL (bottom of the Loopnet post and click on the link to all their other listings). Where / how did they get this listing and what do they really know about the property.
Investor · Houston, TX · Member since 2016 · 54 posts · 25 votes
9y
@Bhavik Patel I agree with what @Oren K. has to say. They are not factoring in an maintenance costs such as routine maintenance to HVAC, if there will be any plumbing issues throughout the year, and so on. There are many things that pop up throughout the year. If you paid list price for it and put 20% down you would roughly bring in 8 or 9K a year. Now at 40K on the purchase price, it starts looking pretty good! Happy hunting.
I am looking to buy my first rental property within the next year. I've been researching quite a bit the past few months to learn about the different factors involved when evaluating properties. I came across a listing in Cleveland, OH which interests me. Can you please give me any insight on this property?
Thank you in advance! Eager to hear your thoughts!
Best,
Bhavik
Are you looking to buy and hold? If so I would not go with a property like this. Of course it seems like a great investment due to the price of the property. The problem is that it is in an area that will not give you great returns at all. Have you looked into turnkeys at all? It might be a bit easier as an investment for you.
Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
9y
Tom Ott
Hi Tom,
I am definitely looking to buy and hold at this point. I do not hold any investments at the moment but I'm looking to find a profitable first property that is around the 50-75k range. I feel like I need to take a well calculated risk but based off of everyone's feedback, I agree that this property mentioned above is definitely misleading. I am not from the Cleveland area but I know that it is a great area to start real estate property investments. I am actually from central NJ but properties here are very expensive for me to buy into right now, as I see it. Therefore I am looking at other areas around the country such as Cleveland.
As for your question on turnkey properties, I have taken a look into them and would definitely be interested. I see that you are from the Cleveland area and appreciate your insight as I try to buy my first investment.
Thank you everyone!
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
9y
If you're limiting your first purchase to 50-75k you're going to be in single-double range in descent areas, at best. There are really nice doubles towards the upper range that will cashflow nicely in the Old Brooklyn area, and the west side of Cleveland.
I am definitely looking to buy and hold at this point. I do not hold any investments at the moment but I'm looking to find a profitable first property that is around the 50-75k range. I feel like I need to take a well calculated risk but based off of everyone's feedback, I agree that this property mentioned above is definitely misleading. I am not from the Cleveland area but I know that it is a great area to start real estate property investments. I am actually from central NJ but properties here are very expensive for me to buy into right now, as I see it. Therefore I am looking at other areas around the country such as Cleveland.
As for your question on turnkey properties, I have taken a look into them and would definitely be interested. I see that you are from the Cleveland area and appreciate your insight as I try to buy my first investment.
Thank you everyone!
Feel free to send me a message. I would be happy to assist.
Some investors can and do make money in lower end areas like this, but it comes with additional risk. It's even trickier if you're trying to do it from out of town. Your management and maintenance people will be a major factor in how well a property like this performs.
Some investors do quite well with these types of properties, and others prefer something more stable / less risky. It depends on your skill set, approach, and risk tolerance.
I am looking to buy my first rental property within the next year. I've been researching quite a bit the past few months to learn about the different factors involved when evaluating properties. I came across a listing in Cleveland, OH which interests me. Can you please give me any insight on this property?
Thank you in advance! Eager to hear your thoughts!
Best,
Bhavik
I wouldn't pull the trigger on that one if I were you. Rough area. If the budget is around 70k I would aim for a C class duplex or a B class single home. Long term your life & ROI will be more stable.