What Disqualifies a Deal in 5 Minutes
Not every property is worth buying. Having strict criteria prevents you from talking yourself into a bad deal because you're excited about owning real estate. Here's what Fairmeadow Capital looks for and what makes us pass.
Must-Have Criteria
If a property doesn't meet all of these, we don't underwrite further.
Cash-on-cash return: 8%+ from day one
We don't rely on appreciation or rent growth to make a deal work. The returns need to exist on the current rent roll.
DSCR: 1.25x minimum
The property must comfortably cover its debt with room for unexpected expenses. Below 1.25x creates too little margin.
Cap rate: 8%+ (Cleveland small multifamily)
Ensures the property generates meaningful income relative to its price, independent of financing.
Located in target Cleveland submarkets
We invest where we know the rental demand, tenant base, comparable sales, and property management landscape.
2-12 unit residential
Small enough for residential financing (2-4 units) or manageable commercial financing. Large enough for real cash flow.
Existing rental income or clear lease-up path
We prefer occupied properties generating income at close. If vacant, we need strong comparable rents and a clear rehab-to-lease timeline.
Preferred Characteristics
These make a deal more attractive but aren't disqualifying if absent.
✓ Separate utilities (tenants pay own heat/electric)
✓ Below-market rents with upside after light rehab
✓ Stable, long-term tenants in place
✓ Brick or block construction
✓ Roof, HVAC, and water heaters under 10 years old
✓ Off-street parking
✓ Near public transit or major employers
✓ Seller-motivated (estate sale, tired landlord, relocation)
Automatic Disqualifiers
✗ Foundation issues
Structural problems are unpredictable and expensive. Not worth the risk on a cash-flow play.
✗ Environmental contamination
Lead paint is manageable. Underground storage tanks, mold throughout, or asbestos remediation are not.
✗ The deal only works with appreciation
If you need the property to go up in value to make money, it's speculation, not investing.
✗ Negative cash flow in year one
We don't subsidize properties from other income. Every property must carry itself.
✗ High crime, no rental demand
Cheap properties in areas where tenants don't want to live aren't deals. They're traps.
✗ Seller won't allow inspection
No exceptions. If we can't inspect, we don't buy.
Run the numbers on a deal