[Calc Review] Deal near Edgewater area

Cleveland, Ohio
Cleveland Real Estate Forum
7yFollow

[Calc Review] Deal near Edgewater area

Albert L.
Bay Area · Member since 2016 · 82 posts · 55 votes

(+) - decent location. 20 blocks from up and coming area in Detroit & 65th area. Seems to be slowly spilling over with folks who might not be able to purchase house and is open to something closer. close-ish to Edgewater park which is on the up and up.

(+) - meets my criteria with cash flow and CoC. would increase both with a lower bid which is possible given comps in surrounding area

(+) - if true, sellers did recent rehab last year so less upfront cash and stress in dealing with rehab

(-) - location - I don't know area super well and things could be a miss block by block in 44102 area. 

(-) - There's a risk that things might not get spilled/gentrified over so I might miss some opportunities for appreciation and would have to work with some more difficult tenants

(-) - Recently sold properties in area were all sub 60k which is somewhat concerning

What am I missing here before I dive into this more seriously? 

View report

*This link comes directly from our calculators, based on information input by the member who posted.

0Reply
14 views

Most Popular Reply

Austin Tam
San Francisco, CA · Member since 2008 · 77 posts · 41 votes
7y

Youre not factoring water/sewer which can range from $110-$200/mo depending on the tenants and your fixtures. It's not the norm to have duplex tenants paying for sewer/water since they're not separately metered. 

1Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Austin Tam
    San Francisco, CA · Member since 2008 · 77 posts · 41 votes
    7y

    Youre not factoring water/sewer which can range from $110-$200/mo depending on the tenants and your fixtures. It's not the norm to have duplex tenants paying for sewer/water since they're not separately metered. 

    1Reply
  • Austin Tam
    San Francisco, CA · Member since 2008 · 77 posts · 41 votes
    7y

    Also, try to look for one with a newer roof.  A lot of the properties have there have older roofs so try to either look for one with a newer roof or bake it into your calculations.  They're 6-7k for duplexes which basically crushes any projection numbers if you don't bake it into your analysis. If there's multiple layers of old roof and rotting wood, you're looking at over 10-13k to replace. 

    Another thing - grass cutting was something I didn't account for when I purchased mine. Add another 30/mo for slow months and 60/mo for the fast months. 

    1Reply
  • Albert L.
    OP
    Bay Area · Member since 2016 · 82 posts · 55 votes
    7y

    @Austin Tam - that would make sense. This was on the disclosure though so I think I'm good there..

    Water: Each tenant pays $75 per mo; owner nets any +/- difference (usually pretty close to

    breakeven)

    Utilities: Tenants pay all other utilities directly

    Do you see anything else outside of that? 

    0Reply
  • Austin Tam
    San Francisco, CA · Member since 2008 · 77 posts · 41 votes
    7y
    Originally posted by @Albert L.:

    @Austin Tam - that would make sense. This was on the disclosure though so I think I'm good there..

    Water: Each tenant pays $75 per mo; owner nets any +/- difference (usually pretty close to

    breakeven)

    Utilities: Tenants pay all other utilities directly

    Do you see anything else outside of that? 

     Make sure to get your own inspection and have them check the big stuff like the foundation, mechanicals, electrical. 

    The property is already occupied? Inheriting tenants can be a whole different set of headaches. Research the property manager, get the leases, see if you can get the background and credit checks of the existing tenants. I'm having huge issues with an inherited tenant. 

    20 blocks in any direction in Cleveland can be a different world. 

    1Reply
  • Albert L.
    OP
    Bay Area · Member since 2016 · 82 posts · 55 votes
    7y

    @Austin Tam - probably a dumb question but with bigger expenditures with replacing roofs, foundations, etc.. would that have any affect in increasing the re-sell value of the property? or does that usually only apply for rehab type work? i guess that would ultimately affect the CoC return with the greater upfront costs which may ultimately not fit in my criteria.

    I can see how landscaping and dealing with crazy tenants (and the expenses that come with that) could affect the monthly cash flow. 

    I guess what I"m asking is how much these bigger capital expenses affect cash flow. It sounds like it would be separate and it would be another factor I'd have to consider if it is worth the risk of a lower CoC and it not actually affecting the property value for whenever I want to resell it in the future.

    0Reply
  • Austin Tam
    San Francisco, CA · Member since 2008 · 77 posts · 41 votes
    7y

    It's hard to say, an agent might have a better idea.  From what I've seen, most of the duplexes in ok condition in the C and better West Cleveland areas go for 70k, but that number's been steadily climbing.  Nice ones that are completely renovated with new everything can go upwards of 100k. Most of the ones on the market have 5-10 years of roof life left. As for foundation, I think that's something that's just expected to be in good structural condition. Waterproofed foundations can be a value add. 


    If financed, you're looking at 150-200/mo cash flow, that's $2,400/yr.  Two furnaces maybe 8-10k? a roof is 6-7k.  A turnover can be 2k+.  So any one of those can wipe out of a year of cash flow. 

    You can get granular and see if the home inspector can give you a ball park estimate of the remaining lifespan of the roof. You could then figure $6.5k divided by remaining lifespan in years divided by 12 and work that into your capex.

    It seems like people get rid of their rental properties before the big ticket items start crapping out; which is a pretty good strategy. If all the mechanicals and roof are in good condition, you can think about exiting with 3-5 years of cash flow and hopefully a little bit of appreciation. 

    1Reply
  • Albert L.
    OP
    Bay Area · Member since 2016 · 82 posts · 55 votes
    7y

    @Austin Tam - Great points here. I think the safe route may be to just offer at around the 56k mark to account for any deferred maintenance that the seller isn't sharing here. 

    Worst case scenario still doesn't look terrible if everything else is as it sounds (rehabbed, new tank, long term tenants, up and coming neighborhood, price/rent ratio, etc etc). 

    We'll see where this goes! Thanks again for taking a look! 

    0Reply
  • Kalanie Tran
    Rental Property Investor · Member since 2019 · 62 posts · 46 votes
    6y

    @Albert L. Hi there, So I ran into this post and got nosy, since I’m also shopping in Cleveland, edgewater area and other nearby cities. Just curious though, did you end up buying any property in Cleveland? What has your experience been so far if you don’t mind sharing.

    0Reply
  • Bob Prisco
    Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
    6y

    @Albert L. you are over thinking , we buy as many as we can on west side, staying away from Storer ave,,,,,,

    Good luck,  

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free