Deal Abstract

https://www.crexi.com/properties/1737818/ohio-27-unit-multi-family-in-cleveland-heights

Massive Cleveland Heights 24 unit building is selling for $1.6m. They claim it's stabilized, but the neighborhood is rough. Profit pending what the financials look like, which were obfuscated.

Part 1. The Basics

Question Notes
1. Property Name: Superior 24
2. Property Full Address: 14174 Superior Rd, Cleveland Heights OH, 44118
3. Property Listing URL: https://www.crexi.com/properties/1737818/ohio-27-unit-multi-family-in-cleveland-heights
4. Property Year Built:
5. Property Number of Units/Doors:

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/10Rgn1Pb4Y3YPb72uH2aF7s9aN3DlvoVymMqkXqbEkkA/edit?usp=sharing: UNDERWRITING COMMENT
2. Asking Price: $1600000: PRICE COMMENT
3. FFEIC Median Income: $1: INCOME COMMENT
4. Last Year's Annual Rent: $: RENT COMMENT
5. Last Year's Annual Expense: $: EXPENSE COMMENT
6. Last Year's Net Operating Income (NOI): $: NOI COMMENT
7. 5 Year Internal Rate of Return (IRR): ****: IRR COMMENT
8. Yearly Cash on Cash (CoC) Rate of Return: ****: COC COMMENT
9. Debt Service Coverage Ratio (DSCR): ****: 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
2. Am I the right buyer for this deal? FIT SCORE 1. Cleveland Heights; 2. Possible value add; 3. Number of units
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:

1. Rent to reliable tenants; 2. Renovations at scale; 3. Timing gentrification at the right time

What the Risks Are

1. Risky cause it's big; 2. Income in neighboring tract is very low ($30k), 3. No financials so everything is inferre

Bonus Muhan's Notes

Big and beautiful, but shady information

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?

Click here to find out.

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