First Deal - Cleveland, OH - Does this deal make sense? Layout ?s

4 Replies | Cleveland, Ohio

Hi All,

My quest for my first rental property continues and I have an off-market opportunity in the Old Brooklyn neighborhood. I have a few questions that I'd like to throw out there to see if anyone has some good insight and if this is potentially a good deal or not.

Up/down double

$57,000 purchase price (hopefully less)

PITI = approx $500/mo with 25% down conventional loan

$14,250 down + closing costs

current rents total just over $1200/mo for both - leases in place

landlord currently pays about $200/mo for water/sewer/trash

I figure about 10% vacancy and 10% maintenance which leaves me with about $400 monthly cash flow

The two major concerns I have are that it needs a new roof (tear-off) and that it has a funky layout. I figure about $7500-$10,000 for the roof. Even if I have to do that right away, I think the numbers still work. I could be way off though. Again, I'm a novice.

Each unit is two-bed one bath, but the second bedroom is only accessible either through the first bedroom or through the hallway off of the stairs (indoors, but outside the unit). The bathroom is only accessible through the first bedroom too. I might be able to add a second doorway to the bathroom through either the living room or kitchen. I'm concerned that with this funky layout it won't rent.

If anyone has any advice, suggestions, comments - I'd greatly appreciate the help.

Thanks in advance!

@Paul Shepherd where are you getting a conventional loan for $42k?...

On paper it makes sense, but that really doesn't mean anything...what is the asset class/location like?...how much other deferred maintenance is there? What is the lease structure and when do they expire?...are they on voucher? Why 10% vacancy? What is the likelihood of turnover after you acquire? How much potential up side is there in a rent increase? What is your strategy with the property...2-yr plan, 3-yr plan...5-yr plan?

This is technically a 1BR with a den...it's non-conforming so it may work as a rental, but you've got to make it conforming to sell it to an owner-occupant...

Originally posted by @Paul Shepherd :

Hi All,

My quest for my first rental property continues and I have an off-market opportunity in the Old Brooklyn neighborhood. I have a few questions that I'd like to throw out there to see if anyone has some good insight and if this is potentially a good deal or not.

Up/down double

$57,000 purchase price (hopefully less)

PITI = approx $500/mo with 25% down conventional loan

$14,250 down + closing costs

current rents total just over $1200/mo for both - leases in place

landlord currently pays about $200/mo for water/sewer/trash

I figure about 10% vacancy and 10% maintenance which leaves me with about $400 monthly cash flow

The two major concerns I have are that it needs a new roof (tear-off) and that it has a funky layout. I figure about $7500-$10,000 for the roof. Even if I have to do that right away, I think the numbers still work. I could be way off though. Again, I'm a novice.

Each unit is two-bed one bath, but the second bedroom is only accessible either through the first bedroom or through the hallway off of the stairs (indoors, but outside the unit). The bathroom is only accessible through the first bedroom too. I might be able to add a second doorway to the bathroom through either the living room or kitchen. I'm concerned that with this funky layout it won't rent.

If anyone has any advice, suggestions, comments - I'd greatly appreciate the help.

Thanks in advance!

If you're in the southern half of Old Brooklyn that is a screaming deal. If you're in say the 3000 block it's probably ehhh or maybe even a little overpriced. 

Hi Guys,

Of course I posted this right before I went on an out of state camping trip and then had work travel. I have yet to make a decision on this one, but still thinking it over. Luckily I still have that opportunity.  Being my first deal, other than my live-in flip I sold last Dec, it's hard to know when to pull the trigger.  

@James Wise - it is on Woburn (northern half of OB) in the 4000s block if that helps. 

@Brandon Sturgill - Great questions.  I guess my intent is to buy and hold. I figure I would fix up the units a little cosmetically in between tenants, but I don;t know that the area calls for a whole lot to be done. 

I do have a guy that will do under $50k conventional.

The layout is weird, and that's one of my sticking points...rentability.  I guess since it is currently rented, it's rentable. I was hoping a 10% vacancy rate was conservative enough. 

The tenants want to stay, but I can't say they would be my first choice. They also smoke inside the units currently.  I would want to end that if I could. 

Until the units are redone, I don;t know that there is much room for increasing rents beyond were they are now.  Maybe $675 max for each. 

Thanks again for your input!

Paul

Originally posted by @Paul Shepherd :

Hi Guys,

Of course I posted this right before I went on an out of state camping trip and then had work travel. I have yet to make a decision on this one, but still thinking it over. Luckily I still have that opportunity.  Being my first deal, other than my live-in flip I sold last Dec, it's hard to know when to pull the trigger.  

@James Wise - it is on Woburn (northern half of OB) in the 4000s block if that helps. 

@Brandon Sturgill - Great questions.  I guess my intent is to buy and hold. I figure I would fix up the units a little cosmetically in between tenants, but I don;t know that the area calls for a whole lot to be done. 

I do have a guy that will do under $50k conventional.

The layout is weird, and that's one of my sticking points...rentability.  I guess since it is currently rented, it's rentable. I was hoping a 10% vacancy rate was conservative enough. 

The tenants want to stay, but I can't say they would be my first choice. They also smoke inside the units currently.  I would want to end that if I could. 

Until the units are redone, I don;t know that there is much room for increasing rents beyond were they are now.  Maybe $675 max for each. 

Thanks again for your input!

Paul

 Yes that's a very good deal. Roofs on those duplexes will typically run around $6,000 or so, so your all in cost appears to be only $63,000. Duplexes in that neighborhood regularly sell for $75,000-$80,000.