First Deal in Cleveland (Shaker Heights) OH - Worth It?

Question

Hi BP,

I'm a long time lurker but this is first post and hoping for some feedback.  I currently hold a couple SFH in the NY area and looking at my first out of state deal.

The property is located in Shaker Heights, a few blocks west of the Shaker library.  It has quite a few basic updates and is a duplex.

The numbers are as follow:

Purchase Price: $55k

Taxes: $~6000

Rent:  $1800 (21600)

PM: $2160

Maint: $2160

Vac: 8% - $1750

Ins: $1200

Water & Sewer: $1500

Cap Ex: $1200

Misc: $500

Mortgage - $300

Total Expenses:  $14070 p/yr

Total:  $21600 - $14070 = $7530 per/yr

Any thoughts on this deal and overall area?  I have visited the area quite a bit and found it to be a well to do neighborhood but would love any feedback from the pros on here.

Thanks!

James Wise · Answer

The taxes are not that nuts in the majority of the cities out this way. Pretty much every other surrounding city/suburb would have taxes under 2k for a house like this one.

Christian Carson · Answer

@Dereck  Singh : welcome!

As others have pointed out, the property is overvalued by the county at that price point. Your taxes should be closer to $2500 on a purchase price of $55k. Check out the handy dandy calculator for Cuyahoga County municipalities here: http://fiscalofficer.cuyahogacounty.us/en-US/property-tax-calculator.aspx

Shaker Heights has the highest property taxes in the state. The majority of the taxes finance the school district, which is one of the best in the state and by far the most high-performing of any district with an integrated population.

The quality of the schools means that renters are very serious about staying in the city. The quality of tenant will depend on the part of town, but it will not be hard to get people to pay on time anywhere.

The city spends money on other silly things like direct-at-your-door trash pickup, but I guess that's part of the ambiance of living in the high-rent neighborhood.

James Wise · Answer

@John Casmon welcome to the site.

Dereck Singh · Answer

Thanks everyone.  The taxes are nuts but I do plan on attempting to lower them, however I based my numbers on what is existing in the event that effort proves unsuccessful.

It is located west of Lee and north of Chagrin, certainly not the most sought after part of Shaker but what I believed to be a strong rental market(please correct me if I am incorrect).

Zoran, its a 2/1 down and a 5/2 up.. I was looking at 750 and 1050 respectively, is that a reasonable est?

There is little to no rehab needed with the exception of some exterior painting.  The interiors and hard systems were done about 3 yrs ago.

Zoran M. · Answer

Hi @Dereck  Singh

Great choice of neighborhoods.  I live in Shaker myself.  A few thoughts:

At $55K, those taxes are way too high.  They should be half that amount!  You will likely need to go through the process to get those lowered in January.

Your rental rate is on the higher end of my comfort range given you are west of Lee...presumably in the Onaway district? North or South of Chagrin?  In the Lomond area, it's 750 (DN) and 850 (up) in a less desirable part of the district.  If you move to a slightly better area, add $100-200 per unit.

Is there any rehab involved with the property?  Shaker Heights has a very strict point of sale escrow w/ required repairs.

Matt R. · Answer

Wow, those taxes are high. What is up with Cincy and Cleveland and the taxes. 25%+ of rent is going to taxes here...that is a rip off tax wise. Can you get taxes lowered with city or re assessment? The tax is more than the mortgage! This is insane.

For comparison in one city I know in Colorado, the same value house, the taxes would $5500+ less. You got to figure how much value $5500 annually means to your bottom line. The rest of the math looks great on this one.

thanks,

Matt

James Wise · Answer

@Dereck  Singh welcome to the site.

As a local I can tell you that shaker heights is a very nice area and you will not lack demand for your home. All in all pretty good deal.

I do not invest in the city personally though as the taxes are higher then surrounding areas.

First Deal in Cleveland (Shaker Heights) OH - Worth It?

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