Violets Manor Underwriting & Deal Memo (Closing Date: 3/24/2025)
Deal Abstract
https://www.loopnet.com/Listing/1690-Eddington-Rd-Cleveland-Heights-OH/35079838/
Mid-turn commercial apartment building looking for an investor to finish the job. Seven of twelve units are leased at $754/mth. Can renovate the remaining four, really renovate the other seven, bring up all units to market, then BRRRR?
For a Loom video recording of me talking through my underwriting, as well as private notes I update as I learn more about the deal, consider joining my premium membership at the bottom of this blog post to learn from all my legwork and analysis. Also pardon the formatting—I wanted to employ an iterative approach and make each version of this deal memo adaptation a milestone good enough for publication!
Part 1. The Basics
| Question | Notes |
|---|---|
| 1. Property Name: | Violets Manor |
| 2. Property Full Address: | 1690 Eddington Rd, Cleveland Heights OH, 44118 |
| 3. Property Listing URL: | https://www.loopnet.com/Listing/1690-Eddington-Rd-Cleveland-Heights-OH/35079838/ |
| 4. Property Year Built: | 1930 |
| 5. Property Number of Units/Doors: | 11 |
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/1hWrmUlxVWWJNxIetLrEcZZ0yvPNLxd0UCbHlpxb8Va0/edit?usp=sharing: UNDERWRITING COMMENT |
| 2. Asking Price: | $750000: PRICE COMMENT |
| 3. FFEIC Median Income: | $1: INCOME COMMENT |
| 4. Last Year's Annual Rent: | $58080: RENT COMMENT |
| 5. Last Year's Annual Expense: | $-1: EXPENSE COMMENT |
| 6. Last Year's Net Operating Income (NOI): | $0: NOI COMMENT |
| 7. 5 Year Internal Rate of Return (IRR): | 0: IRR COMMENT |
| 8. Yearly Cash on Cash (CoC) Rate of Return: | 0: COC COMMENT |
| 9. Debt Service Coverage Ratio (DSCR): | 0: 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 | Good question, gotta figure it out |
| 2. Am I the right buyer for this deal? | FIT SCORE | Property manager said the area was a good example of a place that is just about to turn. South of the area the incomes go up, north the incomes go down towards East Cleveland. Not sure if I'm the right person for it, but I've got a team who is able to operate in terms of renovating and leasing. My property manager could arguably get more help, but I think if we focus more on this area he can scale more. Pros are that it's in Cleveland Heights, Cons are that it is not an insignificant risk in CLE for a small commercial deal. |
| 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. Pro forma rents that Andrew quoted have to work out, 2. EOS system and contractors have to move to the day, 3. The trend of people moving to wealthier areas of a city (investing on the micro neighborhoods and blocks) has to bear out
What the Risks Are
1. Renovations and filling are too slow, 2. Building is nearly 100 years old so what maintenance are we not seeing here, 3. People people people
Bonus Muhan's Notes
Have been excited about this deal and can't wait to go into the numbers here
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
Notice trends in how you think
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.