Cleveland Investment Property – Sylvania

Today I’m analyzing a 3 bedroom Cleveland investment property located in Cleveland Heights, OH.  Cleveland Heights is a suburb of the Cleveland metro area.  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: $99,900                               Cleveland investment property sylvania
  • Rehab Estimate: $3,000
  • Address: Sylvania, Cleveland Heights, Cleveland, OH
  • Beds / Baths / Sq Ft: 3 beds / 2 baths / 1,444 sq ft
  • Property Description: This three bedroom colonial offers four floors of living space, a spacious living and dining room, and a second floor with office space Just add heat to the third floor and expand your total living square footage with the opportunity of a fourth bedroom, family room or playroom. Lower level has a recreation room, decorative fireplace and separate utility work room with built in work bench. Wonderful rear yard is partially fenced, perfect for entertaining and relaxing. Detached two car garage. Conveniently located close to city dog park, Cleveland Metro Park, shopping, restaurants, hospitals, recreation center, and schools. Just minutes to Downtown Cleveland and University Circle. 

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: $1,100/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 within the average size range, so we have assumed rent of $1,100 per month. 

$1,100/mo is very affordable when compared to the area’s median income which is over 48.3x the monthly rent.  There should be a large group of area residents who can comfortably afford the proposed price.  

ANNUAL EXPENSE EXPECTATIONS: $8,225 (62% OF GROSS RENT)

  • Property Taxes: $2,817
  • Insurance: $1,100
  • Property Management: $1,925 (assumes 1.75x monthly rent)
  • Vacancy: $733
  • Maintenance: $1,100
  • Other: $550

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: $99,900
  • Rehab: $3,000
  • Closing Costs: $2,997
  • Total Investment: $105,897
  • Financed Amount: $79,423
  • Cash Investment: $26,474
  • Annual Revenue: $13,200
  • Annual Expenses: $8,225
  • Interest: $3,971
  • Net Income: $1,004
  • Annual Return: 4%
  • Annual Appreciation: $1,998
  • Total Return Potential: 11%
At Recommended Price

  • Purchase Price: $86,000
  • Rehab: $3,000
  • Closing Costs: $2,580
  • Total Investment: $91,580
  • Financed Amount: $68,685
  • Cash Investment: $22,895
  • Annual Revenue: $13,200
  • Annual Expenses: $8,225
  • Interest: $3,434
  • Net Income: $1,540
  • Annual Return: 7%
  • Annual Appreciation: $1,998
  • 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 ~$1,998 is a reasonable expectation.  Here the listing price of $99,900 is fairly attractive although I would prefer a $86,000 purchase price to boost the annual return to 4% before adding appreciation.

Note that this property will also benefit significantly from deducting annual depreciation of $3,213/yr.

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

Leave a Reply

Your email address will not be published. Required fields are marked *