Cleveland Ohio, Rental Expectations

[Allison G.]

Hello Bigger Pockets Community,

I am interested in learning more about the market in Cleveland, OH. Can anyone give me a suggestion of what gross rental return investors are shooting for on rental properties? I know it will vary from area to area and tax rate will also need to be considered, but any general guidelines would be appreciated! I currently purchase in Texas and I am finding several similarities. 

Thanks for your time & I look forward to hearing your insight!

[Timothy Murphy III]

@Allison G.

Even within Cleveland, it can vary dramatically. I manage some in D/F areas that have 25%+ ROIs and property taxes as low as $250/year. The ROIs are high and the tax bills are low because of the low purchase prices. Keep in mind that there are reasons why these areas are that cheap to buy into and usually carry increased risk. They also typically require more hands on management that isn't always possible for out of state investors. For C and B- areas that are more suitable for out of state owners, I believe you'll be looking at ROIs around 10% and property tax bills around $1500/year. 

You can look up a property's exact current tax bill on the Cuyahoga County Auditor's webpage here: http://fiscalofficer.cuyahogacounty.us/AuditorApps...

Property taxes typically adjust upon a sale and revalued based on the new price. You can calculate a pretty good estimate of what a tax bill will be with this calculator here: http://fiscalofficer.cuyahogacounty.us/en-US/prope...

Just choose the correct city or suburb, enter the property's price, and select "no" as primary residence. A $50k property in Cleveland tax district will have a ~$1440.81 tax bill. That same $50k property, assuming 850/month rent and typical expenses would return roughly $5,100/year in net operating income, or a hair over 10% ROI.

Keep in mind those ROIs are basically the same thing as a cap rate and assumes an all cash purchase. Leveraging your funds with a mortgage or other loans will increase your cash on cash returns.

Check with @James Wise or other NEOhio turnkey providers for more details on your question, as they'll have a broader base of experience to draw from.

Edit: Correcting a typo on the numbers.