Newest Investor in the Greater Cleveland Area!

[Rob Z.]

Hi BP Members,

I have quietly milled through hundreds of articles in the past 6 months in order to better educate myself on the exciting world of REI.

Two weeks ago today, I came to an agreement with a buyer to purchase a duplex in Lakewood, Ohio. A neighboring suburb of Cleveland filled with young professionals and one of the nation's highest bar/pub per capita rate.

I have rented here for about 2 years now and the community seems to be 40% Multi-Family 60% single family. Lakewood is a very historic area and 80-90% of the houses were built between 1910-1930's so these properties have some serious character. However, the rooms tend to be a bit smaller, you are 8 feet away from your next-door neighbors and having a decent sized closet is the Holy Grail.

I am fresh out of college and would like this property to be my first step in REI. I will live in the upstairs and rent the downstairs. When looking for properties the last few months the goal was to find a place that was recently updated with a little work left to do and most importantly find a place where I could live rent-free (or pretty close)

So I ended up nabbing a duplex for $90k after it was listed for $115k which was a big win because at list price is was a good deal. While bidding on the house I was playing with the numbers and I had my RE agent doing the same. We had come to the conclusion that with PITI I was going to live RENT FREE!!!

I also wanted to mention that I was eligible for a First-time homebuyer grant of $14k (covers closing costs/ down payment) so I would only be putting down about $2000 of my own money.

The units were rented out for $650 each so I figured that I had finally found what I wanted, to live in a place for free. However, what I found after talking to my insurance and mortgage broker is that the numbers broke down like this:

P+I $426 Prop. Taxes $382 Insurance $120 _____________________ Total $928

There goes my goal down the drain, while I don’t mind paying a little more than break even, it was hard to swallow that I would end up paying around $280 more than expected. Furthermore, I don’t know if this is a sound investment for the future when I will be renting both units out.

The main problem I am having is the amount of property taxes on the house. The city has a 2.49% tax rate. So i'm assuming they assessed my house for somewhere around $170-$180k. My RE agent said once I buy the house, I should have assessor come out to give the correct price, is it that easy?

Also, I know that this is an older house and my HOI has the property insured for $288,000. I am sure there are some investors out there with older homes, so is there anyway to insure around 100,000 either with Actual Cash Value or agreed value?

Any help would be greatly appreciated. Looking back at the length of the post I guess I made this one count.

Have a great day!