Deal Abstract

https://www.loopnet.com/Listing/2502-Noble-Rd-Cleveland-Heights-OH/34629669/

Solid 8 unit in Cleveland Heights. Not much value to add and is under contract, but mainly underwriting to see the numbers and build relationships. Low CoC but decent IRR over 5 years.

Part 1. The Basics

Question Notes
1. Property Name: 2502 Noble
2. Property Full Address: 2502 Noble Rd, Cleveland Heights OH, 44121
3. Property Listing URL: 44121
4. Property Year Built: 1957
5. Property Number of Units/Doors: 8

Part 2. Quantitative, Numbers, and Financials ("Sow Passion, Not easy mediocrity", or S2 P6 N18)

Criteria Amount/Comment
1. Link to Underwriting Google Sheet: https://docs.google.com/spreadsheets/d/1CZK2JKhgpVAWOGMOYsG8am_uOswKS6unFUIs4wMqlt0/edit?usp=sharing: UNDERWRITING COMMENT
2. Asking Price: $615000: PRICE COMMENT
3. FFEIC Median Income: $85311: INCOME COMMENT
4. Last Year's Annual Rent: $90588: RENT COMMENT
5. Last Year's Annual Expense: $-46265: EXPENSE COMMENT
6. Last Year's Net Operating Income (NOI): $46132: NOI COMMENT
7. 5 Year Internal Rate of Return (IRR): 18.04: IRR COMMENT
8. Yearly Cash on Cash (CoC) Rate of Return: 6.4: COC COMMENT
9. Debt Service Coverage Ratio (DSCR): 1.41: DSCR COMMENT

Part 3. Qualitative, Pre-Mortem, and Investor Fit (Every Time Man Profits, Don't Dismiss Serendipity)

Question Score Notes
1. Why is the seller now? TIMING SCORE N/A
2. Am I the right buyer for this deal? FIT SCORE Solid price for solid number of apts, though value add seems limited. Like Cleveland Heights. Cons also that it's already under contract.
3. What has to go right for this deal to work out? Right Rating
4. People?
5. Distribution?
6. Durability?
7. Secret?

What has to go right for the startup to return money on investment:

Get lower purchase, add more value, stabilization has to reduce ongoing costs.

What the Risks Are

1. Already at market price; 2. Rents have limited upside; 3. Ongoing costs are high

Bonus Muhan's Notes

Good to get another deal under the belt, but very meh.

Updates

This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

So, did I invest?

Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.