Newbie trying to buy rental property
Member since 2026 · 1 post · 2 votes
Newbie trying to buy rental property
Most Popular Reply
Member since 2026 · 21 posts · 5 votes
6moHey there,
I'd say you’re not overanalyzing, you’re just early in the learning curve, and honestly what you’re doing is a good sign. Your assumptions are solid and slightly conservative, which is exactly where you want to be with older Cleveland inventory, and construction quality absolutely matters because in homes from 1900 to 1950 it directly impacts how often things break and how expensive things are to fix. The trap you’re running into is trying to eliminate all risk, which isn’t possible, so the goal is to either price the risk into the deal or avoid deals where the risk is unclear.The fact that you’re thinking this way means you’re closer than you think, and at some point it just comes down to trusting your conservative model, getting a solid inspection, and being willing to accept some level of uncertainty.
Take care
10 Replies
- Member since 2026 · 21 posts · 5 votes6mo
Hey there,
I'd say you’re not overanalyzing, you’re just early in the learning curve, and honestly what you’re doing is a good sign. Your assumptions are solid and slightly conservative, which is exactly where you want to be with older Cleveland inventory, and construction quality absolutely matters because in homes from 1900 to 1950 it directly impacts how often things break and how expensive things are to fix. The trap you’re running into is trying to eliminate all risk, which isn’t possible, so the goal is to either price the risk into the deal or avoid deals where the risk is unclear.The fact that you’re thinking this way means you’re closer than you think, and at some point it just comes down to trusting your conservative model, getting a solid inspection, and being willing to accept some level of uncertainty.
Take care
You're not overthinking this at all. In fact, you're doing the work most people skip. The old houses in Cleveland are the reason you need to be this detailed -- a property built in 1920 is going to surprise you, no matter how much you plan.
Here's what I'd tell you: your numbers are solid and conservative, which is exactly right for old construction. The audit report showing poor quality isn't a deal killer on a long hold -- it's actually useful intel that should just increase your repair cost estimates. If you're holding for 10+ years, you want that roof/furnace/electrical work budgeted in from day one. The poor construction quality house might actually be cheaper to acquire, and if you've accounted for the rehab upfront, you're fine.
One thing though -- 10% PM is pretty tight if you're not self-managing. Have you factored in that Cleveland's market might command less rent than your estimated numbers? Run the numbers on a 5-10% rent cut just to stress-test your deal. What's your expected cap rate on each property?
- 6moDave StokleyBusiness MemberProperty Manager · Cleveland, OH · Member since 2015 · 705 posts · 799 votes
I would not rely on the county's audit report to determine the quality of construction. Get a good inspector to do a thorough inspection. There is no way the county can tell you the quality of the electrical, plumbing, etc.
At some point though you can't account for every contingency, which is why you have the maintenance and capex budgeted. If you are especially risk averse then you just need to increase those numbers and find deals that still work with the higher expense projections.
- 6moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 961 votes
Quote from @Placeholder Placeholder:
Hello. i am newbie trying to buy first rental property using DSCR loan. i have been searching clevelend area for three monthes and ready to buy. What i found myself is considering too much to analyze deal?
i put 10 %PM, 10% maintenance cost, 5% Capex , water/sewer $80 and 4% Vacant ratio. Since this market has houses built in 1900 to 1950, there are too many things come to think. .Roof, Furnace, Electricial, wate tank and so on. so I used all the knowledge to analyze deal. and i am now little confident myself on these.
but now i saw the audit report from county, which shows construction quality of the house, which makes me more complicated. I was comparing two deals ; one is poor, ans the other one is average.
Is it really necessary to think about constructoon quatity for old house if I want hold the house for long ?
Am i too conservative when I analyze the numbers?
Please write me any comments. Thank you so much
You're not overthinking it, you're doing exactly what smart investors do when buying in markets like Cleveland, where most inventory is older. The construction-quality rating is good to note, but it shouldn't be the main thing driving your decision; what really matters is the condition of the major mechanicals, the rehab history, and whether the numbers still work after you've accounted for realistic expenses. Plenty of out-of-state investors buy long-term holds in the Midwest with older housing stock as long as they have solid inspections, a clear CapEx plan, and reliable boots on the ground. If your analysis still shows positive cash flow with your conservative assumptions, that's actually a good sign, you're stress-testing the deal the right way.
- 6moMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 501 posts · 553 votesIt's ok to be conservative, but either way, you're going to have to take the leap one way or another. There's no way to eliminate maintenance that is going to be required when buying older properties or any property for that matter. Nothing wrong with being conservative and cautious on your first one or even your 10th, but at some point you'll need to accept the fact that most properties are going to need updates & prevenantive maintnenace.
Quote from @Placeholder Placeholder:
Hello. i am newbie trying to buy first rental property using DSCR loan. i have been searching clevelend area for three monthes and ready to buy. What i found myself is considering too much to analyze deal?
i put 10 %PM, 10% maintenance cost, 5% Capex , water/sewer $80 and 4% Vacant ratio. Since this market has houses built in 1900 to 1950, there are too many things come to think. .Roof, Furnace, Electricial, wate tank and so on. so I used all the knowledge to analyze deal. and i am now little confident myself on these.
but now i saw the audit report from county, which shows construction quality of the house, which makes me more complicated. I was comparing two deals ; one is poor, ans the other one is average.
Is it really necessary to think about constructoon quatity for old house if I want hold the house for long ?
Am i too conservative when I analyze the numbers?
Please write me any comments. Thank you so much
I wouldn't worry about construction quality from 50-100 years ago. I'd worry about the current condition of the property and what it will take to sure things up.
These are the 4 major ones I look at right off the bat:
Foundation issues - are there any / have they already been addressed?
Plumbing - has there been any updates here?
Electrical - has it been updated to romex or is it still the old knob & tube?
Roof - age / does it need to be replaced or repaired?
A good inspector is going to be able to help you assess all of these things for the property so you can make a reasonable decision.
Reafco - Mike Paolucci 512 Reviews You're not being too conservative -- you're being smart. Cleveland market with older homes (1900-1950) absolutely requires you to think about condition because those carry structural and system risk that newer properties don't. A furnace replacement, roof, electrical upgrade -- those aren't cosmetic, they're carrying cost issues. You're right to factor them.
Here's the thing though: Your analysis doesn't need to get more complicated. It needs to be more selective. If a property audit shows poor construction quality and your conservative numbers still look tight, that's a signal to walk. If the average property still cash flows with your conservative assumptions (including the big-ticket items), then you're solid.
The DSCR lenders care about the numbers. But what they don't care about is whether you sleep well at night. If a property requires you to be right on three different assumptions to cash flow, and the construction audit flags concerns, you're taking on uncompensated risk.
Quick question for you: Are you comparing deals where the difference is JUST the construction quality audit, or are there other differences (price, rental income, location) between the two deals you're looking at?
- Member since 2025 · 6 posts · 0 votes6mo
the reality is on any home, especially older ones, things will break and need repaired. Building in a annual number for this is smart when assessing the deal. If there are major concerns, I would try to have those addressed thru the purchase process either by having the seller repair or replace or issuing you a credit at closing or a reduction off the purchase price. Also, when getting into rentals it can become a game of numbers. 1 roof to replace when you have 1 unit is a lot. but if you scale and build up, say 10 units, the cost to repair the 1 roof becomes more manageable.
- Member since 2023 · 243 posts · 199 votes6mo
100% agree with everyone. The conservative approach is correct for Cleveland homes. Let your math "be mathin".
Roof, furnace, water heater, etc are all factors but window replacements. Many home owners just let them go and paint seal them. This only works for so long where you will have to replace them.
Overall, get an inspection and have boots on the ground to physically look at it. Never ever buy just from internet pictures as many are enhanced and staged. Yes, I know investors do it all the time as they can work the home down to the studs if needed but it is not a good approach for new investors.
But honestly, the 1910 homes work out well as they were made with old school wood with heavy materials where cost cutting wasn't priority #1.
- 6moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Placeholder Placeholder:
Hello. i am newbie trying to buy first rental property using DSCR loan. i have been searching clevelend area for three monthes and ready to buy. What i found myself is considering too much to analyze deal?
i put 10 %PM, 10% maintenance cost, 5% Capex , water/sewer $80 and 4% Vacant ratio. Since this market has houses built in 1900 to 1950, there are too many things come to think. .Roof, Furnace, Electricial, wate tank and so on. so I used all the knowledge to analyze deal. and i am now little confident myself on these.
but now i saw the audit report from county, which shows construction quality of the house, which makes me more complicated. I was comparing two deals ; one is poor, ans the other one is average.
Is it really necessary to think about constructoon quatity for old house if I want hold the house for long ?
Am i too conservative when I analyze the numbers?
Please write me any comments. Thank you so much
You’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9465 Reviews
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