[Calc Review] Help me analyze this Cleveland deal

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John Nachtigall
Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
5y

I own 4 duplexes in Cleveland.   They are fully managed by Holton-Wise who are active in these forums @James Wise.   I have been very happy with the management.  I have to take care of the utilities, they take care of everything else.   You should be aware you have to pay for water/sewer yourself, they bill to the owner not the tenet in Cleveland.   

I would suggest you check out their website Link and The Ultimate Guide to Cleveland Neighborhoods guide UGCN Link.  James will do a personalized analysis of a property for you for a small fee, I put a link to one of the analysis he did for me below.   I found them invaluable given I am remote and he understands the market so well.   A little money up front was well worth the very in-depth analysis.  Even if you don't use them there are hundreds of videos analyzing properties in Cleveland and you can learn a lot.  

Good Luck


YouTube Link

I forgot to include my numbers for water/sewer.   I paid $2705, $1340, $2336, and $1338 for the 4 properties I own for 2020.  You can see that it is very variable depending on how many people live in the properties (families vs no kids etc.)

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  • Brendan Miller
    Rental Property Investor · Gilbert, AZ · Member since 2020 · 210 posts · 163 votes
    5y

    @Jezelle John looks pretty good to me without knowing the address. A few tips that I use: 1) make sure the rental rate is realistic, that could bust the deal quickly, 2) make sure the tax reflects the tax based on the sale price, most county websites have a tax calculator 3) maintenance / CapEx could be a bit low based on the age/condition, but I normally use 5% for each also, but I looked for 1980s+ or newer homes


    I assume it's a SFH? I typically include water/sewer/gas for MFHs

    1Reply
  • Jezelle John
    OP
    Member since 2021 · 74 posts · 49 votes
    5y

    It is a MFH. Actually a realtor gave me the numbers then I did my own research, of course they didn’t account for capex, maintenance, and vacancy, which directly decreased my cash flow. I just wanted to see what my fellow BP members would think. I need to do more research if those rents are realistic and accurate. Still learning this market. The utilities including the water are paid for by the tenants- I need to make sure that is accurate too because that’s major. 

    Thanks for commenting 

    1Reply
  • Allen McGlashing
    Investor · Cambridge, MA · Member since 2017 · 195 posts · 106 votes
    5y

    @Jezelle John

    I would add in $100/month for sewer/water in most cases the landlord has to pay this unless it’s metered separately. You need to consider the shape of the property, a lot of houses in Cleveland are older so the Cap ex and repairs budget might need to be higher. A 7% return is a basehit and for a new investor i think is worth it. You will learn so much from your first deal that is where your return really comes from. You will find and put systems in place and that will make your next deal even easier.

    4Reply
  • Jezelle John
    OP
    Member since 2021 · 74 posts · 49 votes
    5y

    Thank you, that is what I was thinking that this property may be appropriate for me as a newbie and just building the momentum. I did question the water bill being paid by the tenants-that would be a home run for me if the meters are separated. 

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    Always add about $100/ mo for sewer and another $90/mo for water 

    1Reply
  • Allen McGlashing
    Investor · Cambridge, MA · Member since 2017 · 195 posts · 106 votes
    5y

    @Jezelle John 

    It’s more common is side by side units if it’s an up and down then “most likely” it’s not separately metered and you will be paying it. I would still look further into the deal get pictures if you don’t have them and start calling PMs and see where the rent range is.

    1Reply
  • Jezelle John
    OP
    Member since 2021 · 74 posts · 49 votes
    5y

    Do you know any property managers in the Ohio area? 

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Jezelle John:

    Do you know any property managers in the Ohio area? 

     I have some managers in the Ohio area that I can refer you to

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    1Reply
  • John Nachtigall
    Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
    5y

    I own 4 duplexes in Cleveland.   They are fully managed by Holton-Wise who are active in these forums @James Wise.   I have been very happy with the management.  I have to take care of the utilities, they take care of everything else.   You should be aware you have to pay for water/sewer yourself, they bill to the owner not the tenet in Cleveland.   

    I would suggest you check out their website Link and The Ultimate Guide to Cleveland Neighborhoods guide UGCN Link.  James will do a personalized analysis of a property for you for a small fee, I put a link to one of the analysis he did for me below.   I found them invaluable given I am remote and he understands the market so well.   A little money up front was well worth the very in-depth analysis.  Even if you don't use them there are hundreds of videos analyzing properties in Cleveland and you can learn a lot.  

    Good Luck


    YouTube Link

    I forgot to include my numbers for water/sewer.   I paid $2705, $1340, $2336, and $1338 for the 4 properties I own for 2020.  You can see that it is very variable depending on how many people live in the properties (families vs no kids etc.)

    7Reply
  • Matthew Patterson
    Member since 2021 · 16 posts · 13 votes
    5y

    I do agree that an area like Cleveland needs VERY close inspection. Neighborhoods can change just blocks away. 

    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    5y
    Originally posted by @John Nachtigall:

    I own 4 duplexes in Cleveland.   They are fully managed by Holton-Wise who are active in these forums @James Wise.   I have been very happy with the management.  I have to take care of the utilities, they take care of everything else.   You should be aware you have to pay for water/sewer yourself, they bill to the owner not the tenet in Cleveland.   

    I would suggest you check out their website Link and The Ultimate Guide to Cleveland Neighborhoods guide UGCN Link.  James will do a personalized analysis of a property for you for a small fee, I put a link to one of the analysis he did for me below.   I found them invaluable given I am remote and he understands the market so well.   A little money up front was well worth the very in-depth analysis.  Even if you don't use them there are hundreds of videos analyzing properties in Cleveland and you can learn a lot.  

    Good Luck


    YouTube Link

    I forgot to include my numbers for water/sewer.   I paid $2705, $1340, $2336, and $1338 for the 4 properties I own for 2020.  You can see that it is very variable depending on how many people live in the properties (families vs no kids etc.)

     Thanks for the positive feedback John.......Glad we've been able to help you keep crushing your investment goals out here in Cleveland.

    2Reply
  • Jezelle John
    OP
    Member since 2021 · 74 posts · 49 votes
    5y

    Wow this is such a major help! I’m so appreciative. Thanks 

    1Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @John Nachtigall why would you pay utilities? This is a pass-through cost that should be net-zero...tenants pay 100% of the utilities 100% of the time...directly or back billed...

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  • John Nachtigall
    Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
    5y
    Originally posted by @Brandon Sturgill:

    @John Nachtigall why would you pay utilities? This is a pass-through cost that should be net-zero...tenants pay 100% of the utilities 100% of the time...directly or back billed...

    For Water and Sewer they will only bill in a landlords name.     So if the tenet does not pay, the debt and obligation is the landlord.   Also there are specific laws that state the landlord must supply water.  If you billed back and they don't pay you will be trying to evict for a bill that is not in the tenets name, not good.  It is a Cleveland thing, I know all cities are not like that.   So water/sewer is just built into the rent.  

    I have 2 properties where the gas is to a common boiler, so no way to split that.   Same thing, built into the rent.  

    Everything else goes to the tenet when there is a tenet.  When they are vacant, you have to transfer the utilities into your name or you can't do the construction work because there is no power and/or no gas so no heat.  

    3Reply
  • Clay Mckissack
    Member since 2019 · 6 posts · 2 votes
    5y

    @Jezelle John

    Your taxes are way low … they are closer to 4% of your total purchase price. You will be negative cash flow.

    1Reply
  • Anthony KingPro Member
    Investor · Charlotte, NC · Member since 2020 · 239 posts · 247 votes
    5y

    @Jezelle John check out rentometer.com, dealcheck.io, and rentcast.io

    2Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @John Nachtigall the City of Cleveland, like most cities, have a tenant agreement...some require an affadavit...water can be in the tenants name, but it requires a lot of due diligence on your part because a delinquent bill becomes a lien on the property. Lumping utilities into the rent is not a best practice...it's quite lazy actually. 

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    5y
    Originally posted by @Brandon Sturgill:

    @John Nachtigall the City of Cleveland, like most cities, have a tenant agreement...some require an affadavit...water can be in the tenants name, but it requires a lot of due diligence on your part because a delinquent bill becomes a lien on the property. Lumping utilities into the rent is not a best practice...it's quite lazy actually. 

     lol. Hey man why don't you come up north and manage a few 100 C-Class Cleveland rentals using that "best practice" of yours and let all of us Cleveland simpletons know how great it's working out for you about 24 months from now.

    2Reply
  • David TerbeekPro Member
    Property Manager · Cleveland, OH · Member since 2016 · 260 posts · 162 votes
    5y

    @Brandon Sturgill  I wish I was operating in Columbus or most of the rest of the country where we did not face the challenges of water & sewer being owner responsibility.  But the reality is this is how it is in Cleveland.  The water/sewer stays in the owner's name.  There is a process, as noted, to have a tenant set up an account but it is a complete joke because unpaid charges just revert to the owner in the end.  It is very complicated for less than sophisticated tenants so for us to spend hours trying to educate (argue with?) each tenant to set up an account that doesn't protect the owner in the end would be illogical.  We pay the bill and then bill the tenant for reimbursement.

    The other issue we have is that most multi-family homes are not separately metered.  If they are not separately metered you can not, legally (lots of case law on it), bill the tenant for the charge.  Owner's absorb the cost of water/sewer.  Tenants paying is just not a legal solution.

    216-926-2900
    1Reply
  • Alan Bostick
    Homeowner · Orrville, OH · Member since 2021 · 71 posts · 31 votes
    5y

    @James Wise @David Terbeek

    Total newbie here, but what I believe what @Brandon Sturgill is getting at is that while you would have the utilities in your name, having the water/sewer bill back written into the lease agreement paid monthly with rent payment. That was my initial thought upon hearing the idea, but perhaps I am mistaken. 

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    5y
    Originally posted by @Alan Bostick:

    @James Wise @David Terbeek

    Total newbie here, but what I believe what @Brandon Sturgill is getting at is that while you would have the utilities in your name, having the water/sewer bill back written into the lease agreement paid monthly with rent payment. That was my initial thought upon hearing the idea, but perhaps I am mistaken. 

     We understood what he's saying, but what's he's saying is irrelevant. Dave and myself are the Pepsi and Coke of the property management space in the Cleveland market. Brandon is a dude who googled some stuff that he thinks will work. We are two dudes who have won thousands of Cleveland housing court cases.

    2Reply
  • David TerbeekPro Member
    Property Manager · Cleveland, OH · Member since 2016 · 260 posts · 162 votes
    5y

    @Alan Bostick  Yes, if you have a single family you can seek reimbursement for the water/sewer when you collect rent.  It is considered rent (be sure lease specifies this) so you can evict for non-payment.  If it is a multi-family that is not separately metered you can not do it this way because you can't prove how much each unit used.

    216-926-2900
    1Reply
  • Alan Bostick
    Homeowner · Orrville, OH · Member since 2021 · 71 posts · 31 votes
    5y

    @David Terbeek I see! Thanks for the insight!

    0Reply
  • John Nachtigall
    Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
    5y
    Originally posted by @Alan Bostick:

    @James Wise @David Terbeek

    Total newbie here, but what I believe what @Brandon Sturgill is getting at is that while you would have the utilities in your name, having the water/sewer bill back written into the lease agreement paid monthly with rent payment. That was my initial thought upon hearing the idea, but perhaps I am mistaken. 

    He is, there are a lot of ways of getting the tenet to pay utilities.   What he is talking about is RUBS (Ratio Utility Billing System).   This is used when it is a multifamily building but does not have a separated utility, so 1 common bill.  The landlord charges it back to the tenets of a multifamily building using various ratios.   The problem is how do you divide the bill?   In a duplex if 1 tenet is a family and 1 is a single person do you split 50/50.   If not and you charge the family more are you discriminating against the family?   Also are you and the tenets willing to have a different amount of "rent" every month, because utility bills vary.   In general the bigger the building and the more similar the units, the more RUBS makes economic sense.  

    I understand there is a strong desire to have tenets pay utilities, it is ideal for any landlord.   But in this case, with a commonly billed duplex, to bill them back I would still have to have the utilities in my name.   Set up a RUBS system and decide on a ratio that is agreeable to all tenets.   Bill the tenets every month a different amount.   And if they don't pay, I still have to pay because they would otherwise lien the house.   And if I tried to evict I would be doing it on a utility bill that is not in the tenets name.    

    As it is I have an account for each house, I have it on autopay and I don't have to monitor it or worry about it.   It is an expense of the rental so that helps with taxes also.  I also get all the notices (by email).   Last month I got a notice the water bill was high for one of the rentals.   PM sent a tech and the toilet had been running all month.   I can't imagine you would want to hear a toilet running all month, but they had.   The tech fixed it, and did some other fixes.    So in that case it helped keep the house in good shape with some simple preventative maintenance.  I would not call it lazy, I would call it efficient, but to each their own.

     

    0Reply
  • David TerbeekPro Member
    Property Manager · Cleveland, OH · Member since 2016 · 260 posts · 162 votes
    5y

    @John Nachtigall  While I am jealous about how the world works everywhere else, that is still not legal in a residential unit.  (NOTE:  We do us RUBS in commercial so very familiar with the concept)

    216-926-2900
    0Reply
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