How to Analyze a Cleveland Investment Property
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- Опубліковано 15 чер 2024
- Ever wonder how we analyze an investment property? Wonder no more....as josh and Dave take you on a tour of a typical Cleveland duplex and run the numbers to see if this property is a deal or no deal!
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00:00 - 00:36 INTRO
00:37 - 04:06 APARTMENT TOUR
04:07 - 04:55 PORCH
04:56 - 09:27 BASEMENT
09:28 - 13:02 KNOWING YOUR NUMBERS
13:03 - 15:38 ANALYSIS
15:39 - 17:31 OUTRO
You need to save wayyy more than .05 for maintenance.
I like your honesty and education about the conditions of the Cleveland properties. I have to say given the older 100+ year old properties plus humidity being near Lake Erie can leave houses in bad shape. Like you mentioned, almost all houses have moisture in the basement which is concerning for rot and mold. As well as questionable structural issues at times. Some homes can be a money pit.
Well said!
Go there at night. Are there 5000 watt car stereos blasting? Dance parties in the middle of the street at 3am? Colt 45 and Olde English 800 bottles laying everywhere? Used prophylactics on the sidewalk? Stacks of used tires? Houses without windows and doors? Piles of trash? No stores or businesses except hair care, liquor, and gas stations?
That is another way of doing your due diligence! We always recommend knowing a little about the neighborhoods you’re investing in
Lakewood is generally safe area, what you’re describing it’s East Cleveland, Glenville, Collinwood.
I invest in Euclid - pretty decent area, too.
It looks quite shabby for my taste but I’m not liking west side.
I like how they present info - they definitely just starting and don’t have the attitude “take it or leave”…lol
@@irinab7524 I was describing the Section 8 tenents that moved in next door to me at my old house in Slavic Village. The title of the video is Cleveland not Lakewood. Plus, I wouldn't brag too much about Euclid lol.
@@desdenova69sec.8 tenants are notoriously trashy. Slavic Village is another ghetto in Cleveland area - has nothing to do with Lakewood.
Well, Euclid is different depending where is you live.
I’m investing in Cleveland since 2008 and got my RE license in 2011, so it’s not just my experience but my clients, too. All my clients were investors and I know Euclid on street by street basis. If you buy between highway and Euclid Ave - it’s not good but your ROI will be around 25% - locals don’t buy there, mostly west coast investors who look at the numbers and like it.
I’ve sold 7 my rentals and ready to list next one after total remodel but this townhouse in the safest area of Euclid - uphill in zip 44143…look it up.
The townhouse is in very safe and established area where is very hard to get rentals - my clients buying only if the price is low.
I’m here to compare the ROI and mine are much higher than this example.
This ROI=11% - it’s gross return rent on price…..mine 15.8% and mine built in 1966 not in 1920’s.
This NOI=8.7% - mine=11.7% which is net operating income = after all pay-as-you-go expenses. Not including maintenance, reserves, property management, vacancies or financing.
There is HOA fees, that’s why you don’t depend on the tenants to do landscaping, roof replacement is included and this HOA even replace your A/C unit if it’s stop working.
I had clients from California who bought there and they don’t pay PM - it’s easy to manage.
There are cameras around all buildings, my tenants drive fancy cars and there is virtually no crime. No landlords take sec.8 anymore - it’s a nuisance for the neiborhood.
After this video I’m not going to sell it for $90K, most likely I’ll offer it on BiggerPockets forum.
My clients won’t buy anything with less than 20% of ROI because they we’re buying it when TOI was 35-40% …I’m ready to sell unit with a tenant who pays $1K/mo but I don’t want to increase her rent to the market $1200-1250.
Each of my rental has all appliances, some even washer/dryer or ventless washer/dryer hook-up.
This is a luxury in comparison to what’s in this video.
BTW, my Euclid rental close to downtown (E 222-Babbitt) has rent $1300/mo and price would be most likely around $140-150K. I’ve sold recently my rental for $100K cash - they updated kitchen and kitchen floor and rented for $1500. That house was also 4bed/2bath with finished basement and 2 car garage at E 260th…..extremely safe area close to Lake county.
When people are not familiar with Euclid - it’s easy to slam it all in one pile. Euclid has the highest ROI in comparison to any Cleveland suburbs and 90% as safe as it takes
Euclid is one of our favorites! @@irinab7524
Thank guys. You change my mind. I was about move from MA to Georgia but after watching your video I decided to move to. Ohio
Excellent…let us know how we can help!
Nice video approach; good pace, seems genuine. I appreciate your willingness to talk about the good and bad in your videos. Having said that, I have a few doubts about what you guys are showing us. I took the time to run your numbers. If one takes into consideration ONLY the factors you guys consider (vacancy, PM, insurance, etc.), my numbers are almost the same (not using BP tools). However, I find this analysis a little over-optimistic. Let's see...
After your tour, it seems apparent that it will be necessary to spend some money on refreshing this property if you expect to get $1,400 per unit. Maybe not a lot, but it adds up.
And it seems surprising that you can get $1,400 for a 2bed/1bath without central A/C. I may be wrong, so I will trust you guys on that...
Most importantly, however, there are "annual", "quarterly", and "seasonal" expenses in running a property (any property) that should be part of the investment consideration. Beyond the 5% you guys allocated for monthly maintenance & repairs of these old properties.
For example:
(1) annual rental registration ($150 for a duplex in Lakewood-$75 per unit);
(2) cost of maintaining an LLC if you run the property through such entity (at least $150/year just to renew the registered agent);
(3) seasonal expenses, some of them inevitable like snow removal (especially in the Cleveland area!), but there might also be some landscaping work, especially in Spring, after such a long Winter (and possibly in the Fall as well), and the Fall tune-up of the furnaces - these are all expenses on top the 5% for maintenance & repairs
(4) depending on how you get your tenants, there may also be "advertisement expenses".
(5) finally, water/sewer bills combined may cost some $120-150/month; in some properties, the cost could be even higher. I wonder how you guys manage to slip the water and sewer bills into the contract if the meters are not separate (in the Cleveland area they normally aren't, separate meters are very, very rare...).
Those are things-from the top of my head-that your analysis should consider. Adding all up, the ROI would be considerably lower.
In any case, thank you for a very informative video!
These are all valid points! We encourage you to run the numbers your way, no two investors are alike. Please let us know if you have any questions
Should I do a virtual walkthrough with a realtor if I live down south. Or should I apply to Cleveland and look at it in person if I'm an investor
Stan,
We would be happy to do a virtual tour for you! Or if you decide to come to Cleveland, we will be sure to carve out some time to take you around. Give us a call and we can get you started!
The worst neighborhoods in lakewood are on par with the best areas of cleveland. It's not Cleveland.
Lakewood is awesome, but there are some fantastic parts of Cleveland that are similar. Kamm's (which is super close and borders Lakewood) is just one example