When looking into properties in Cleveland, the first question many ask is how to calculate rental yields. In order, there are five main factors to consider. Going through them one by one reveals why Cleveland is consistently mentioned among Ohio investors. The term "rental yield" may seem somewhat vague, but it ultimately boils down to a calculation comparing rental income after various expenses to the purchase price.

The first factor is the rent. According to Redfin data, the recent average rent in Cleveland is around $1,665. Looking at the current market, this is not low compared to other major cities in Ohio. When considering the rent-to-price ratio, Cleveland is often noted as being relatively accessible among Ohio's major cities.

The second factor is loan conditions. For investment properties, a down payment of 15 to 25 percent is required. A credit score of 620 or higher is needed to qualify for a loan, but a score above 740 is necessary to secure favorable interest rates. Interest rates are set 0.5 to 0.75 percentage points higher than those for owner-occupied homes.

The third factor is how rental income is recognized. Lenders typically consider only about 75 percent of the expected rental income as qualifying income. It's also important to note that a lease agreement or rent schedule from an appraisal is needed as supporting documentation. If the property already has tenants, obtaining this information is generally easier.

The fourth factor is the 1 percent rule and cap rate. Based on the average rent of $1,665, the 1 percent rule applies when the purchase price is below $166,500. Cleveland has a relatively high number of properties that meet this criterion compared to other major cities in Ohio, but it is necessary to verify this through the cap rate based on net operating income. The cap rate is calculated by dividing net operating income (after deducting property taxes, management fees, and maintenance costs) by the purchase price, providing a figure that is closer to the actual yield than the 1 percent rule.

The fifth factor is property taxes. The effective property tax rate in Cuyahoga County, where Cleveland is located, is 2.29 percent, which is higher than the state median of 1.60 percent. The median property tax bill in Cuyahoga County for 2026 is estimated to be around $3,819 annually. The overall effective tax rate in Ohio is 1.53 percent. Property taxes can vary significantly by community, so it's advisable to check them for each property. Even within Cleveland, tax rates can differ based on school district and municipal boundaries, meaning that two properties with similar rents but different addresses may have varying net incomes due to tax differences.

These are the basic factors for calculating rental yields, but tenant laws should also be considered. In 2022, Ohio's HB 430 bill blocked local governments from enacting rent control ordinances through amended law 5321.19. The fact that local rent control is not implemented throughout Ohio, including Cleveland, increases predictability in yield calculations.

Management costs should also be on the checklist. When outsourcing to a management company, 8 to 12 percent of the monthly rent goes to fees, and it's common to set aside about 1 percent of the property's value annually for maintenance. Landlord insurance, which includes rental loss and liability coverage, is typically more expensive than standard homeowners insurance. Since rents are lower than in other major cities, this fixed cost proportion tends to have a relatively larger impact on yields, so comparing fee rates among management companies before signing a contract can be helpful. Additionally, since Ohio legally prohibits local rent control, the burden of predicting rent increases in Cleveland is relatively less than in regulated areas.

Finally, if you plan to sell after holding the property long-term, it's worth noting that you can defer capital gains tax through a 1031 exchange. The requirements are outlined on irs.gov. This article is not investment or legal advice, and it is advisable to consult real estate and tax professionals before making any actual agreements.