Feedback on deal in Cleveland

[Nicole S.]

I'm about to jump in to my first out of state deal and I'd love some advice.

• 1200 sq feet 3br/2b in Cleveland area (good, safe neighborhood), house totally renovated
• $90,000 purchase price with 20% down
• Estimated rent $950-1000
• Expense assumptions: assumptions: $70/month insurance, $170/month taxes, 15% expenses & capex, 8% prop management, appreciation 3%

I figure it should conservatively cash flow $450/month.

Does that sound about right? Anything I'm missing?

Thanks in advance!

Nicole

[Michael Swan]

Hi @Nicole S

I invest in NE Ohio (BP podcast 238 guest) and live in San Diego too.  What neighborhood are you speaking of?  Plus, people on BP don't agree with me on this point very often, but I have found you need about $10,000 in reserves for each single family rental property.  I just was required by the city to replace the roof on a single family I own in Euclid.  That is a pricey proposition.  That is just one example where that 15% expenses and cap ex does not hold water (sorry for the pun with Houston right now).  Now if you have a brand new roof, cabinets, flooring, furnace, AC, hot water heater, plumbing, appliances, etc... than that is a different story.  You just need to prepare for when Murphy's law raise its ugly head.  It is not if it is when.  People that invested in single family in Houston, would have been wise to have at least $10,000 in reserves at this moment.

Listen to podcast 238, go to my profile, and give me a call.  I love to talk RE. 

Swanny