Cleveland Investment Property – Sheffield -South Euclid, OH

Today I’m analyzing a 3 bedroom Cleveland investment property located in South Euclid, OH.  South Euclid is a suburb of Cleveland.  Take a look at my analysis of this property and let me know if you agree.  You can also send me an email with additional questions or to learn more about this property.

CLEVELAND INVESTMENT PROPERTY OVERVIEW

  • Market: Metro Cleveland Area
  • Listing Price: $88,500                               Cleveland investment property Sheffield South Euclid
  • Rehab Estimate: $6,000
  • Address: Sheffield, South Euclid, OH
  • Beds / Baths / Sq Ft: 4 beds / 2 baths / 1,836 sq ft
  • Property Description: Your perfect income property! Or you can live in half and rent out the other half, the possibilities are endless. Well maintained and spacious with lots of updates including but not limited to all updated electrical in 2014, two new hot water tanks 2008/2015, and all new windows in 2003. Close to shopping, restaurants and more. Minutes from downtown Cleveland, Legacy Village, and Beachwood Place.

NEIGHBORHOOD GRADE: C

  • Median Income: $53,095
  • Poverty Rate: 12%
  • Unemployment Rate: 11%
  • % with Bachelor’s Degree: 37%
  • % of Renters: 28%

The zip code 44121 is average for the Cleveland metro area based on key economic factors including median annual income and the poverty rate.

RENTAL PRICE EXPECTATIONS: $1,200/MO

The vast majority of rental properties in this area are 3 bedrooms. These homes generally rent for $975 – $1,175 per month with a median of $1,100.  This investment property is above the average size, so we have assumed rent of $1,200 per month. 

$1,200/mo is affordable when compared to the area’s median income which is over 44.2x the monthly rent.  There should be a number of area residents who can comfortably afford the proposed price.  

ANNUAL EXPENSE EXPECTATIONS: $9,011 (63% OF GROSS RENT)

  • Property Taxes: $3,111
  • Insurance: $1,200
  • Property Management: $2,100 (assumes 1.75x monthly rent)
  • Vacancy: $800
  • Maintenance: $1,200
  • Other: $600

The expenses for this property are generally in-line with industry standards with the exception of property taxes, which are above the typical 2x rent.  Since this is a – C level neighborhood I have  assumed 1 month of vacancy every 18 months and one-half month of cushion for unexpected expenses.

Property management is set at ~1.75 months rent.  This factors in regular monthly management fees along with various other new tenant and lease renewal fees that companies may charge.

FINANCIAL SUMMARY

At Listing Price

  • Purchase Price: $88,500
  • Rehab: $6,000
  • Closing Costs: $2,655
  • Total Investment: $97,155
  • Financed Amount: $70,800
  • Cash Investment: $26,355
  • Annual Revenue: $14,400
  • Annual Expenses: $9,011
  • Interest: $3,540
  • Net Income: $1,849
  • Annual Return: 7%
  • Annual Appreciation: $1,770
  • Total Return Potential: 14%
At Recommended Price

  • Purchase Price: $76,000
  • Rehab: $6,000
  • Closing Costs: $2,520
  • Total Investment: $92,520
  • Financed Amount: $67,200
  • Cash Investment: $25,320
  • Annual Revenue: $14,400
  • Annual Expenses: $9,011
  • Interest: $3,360
  • Net Income: $2,029
  • Annual Return: 8%
  • Annual Appreciation: $1,770
  • Total Return Potential: 15%

MY RECOMMENDATION

I have analyzed this Cleveland investment property assuming a financed purchase.  With a neighborhood grade of C , I would normally target a minimum annual return of 12% with an additional 3% margin of safety.  I think 2% annual appreciation of ~$1,770 is a reasonable expectation.  Here the listing price of $88,500 is fairly attractive although I would prefer a $84,000 purchase price to boost the annual return to 8% before adding appreciation.

Note that this property will also benefit significantly from deducting annual depreciation of $3,246/yr.

Want to place an offer or learn more about this property?

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