Apartment Complex- Investment Analysis (10 Units)

Hi Prospects & Friends,

I discovered this property a few days ago as it came up in my search for investment perimeters for an apartment complex I'm looking to buy through a O/F Direct Concept. As of today it's only been on the market for 14 days, so this weekend I will drive by to see the true picture and attributes. Listed below are the investment stats for this property.

Listing Price- $590,000
Total Units- 10
Gross Sq.ft.- 6,240
Price/Sq.ft Last 6mths- $127
Location- Prime and A+
Taxes- $8,908/yr.
Insurance Proposed- $450/mth
Rental Rate Last 6mths- $1.16/sq.ft.
Layout- 10 units each (1Br/1Ba)
Average Unit Sq.ft.- 624
Economic Life- 40 years
Year Built- 1964

Current Landlord is renting 9 units @ $500/mth, & the other 1 unit is @ $425/mth. So the total rent is $4,925 as per the contract rents. After analyzing all this see my investment analysis below:

Current Rent Contracts - $4,925
Taxes- $742
Insurance- $450

($4,925-$742-$450=$3,733/7.34x1000)= $508,583

Market Rents- $7,238
Taxes- $742
Insurance- $450

($7,238-$742-$450=$6,046/7.34x1000)=$823,705
($7,238-$742-$450=$6,046/8.05x1000)=$751,056

So after analyzing the quick investment stats, and because the current seller/landlord said the property needs minor updates and that the rents are below market I would not pay more than $508,583 for this property. My investment stat range of $751,056-$823,705 says this is what this property is worth and would sell for based on similar stat properties in last 6 months. The median upward adjustment is $792,480. Conclusion is stated below:

1. My Buyer/Investment Hat- Says don't pay more than $508,583 for this 10 unit apartment complex

2. My Real Estate Broker Hat- Says I have a jewel because the recession has caused the current seller/landlord to list apartment complex for $94.55/sq.ft which is below what the true properties are really selling for which is $127/sq.ft. So I know based on my investment stat range I'm looking at least a resale between $751,056-$823,705 & factor in the median upward adjustment of $792,480 as the investment stat backup closure. Plus market rents are going for $1.16/sq.ft!

3. My Property Manager Hat- Says leave contract rents as is and when each tenant decides not to renew then rent @ market! "Caveat" don't ever run off a tenant by raising their rent to market when it's time to renew, because the whole idea of my don't pay more than $508,583 was based on contract rents and not market rents, so the investment numbers would fit into the current perimeters! Only raise contract rents to market when the tenants decide not to renew, and remember you have nothing too loose because you factored all the investment stats in the very beginning before the purchase. So once you do start to raise contract rents to market the additional income will be extra, and it will benefit you greatly with reserves for the apartment complex and even yourself!

4. My Seller/Interior Design Hat- Says since the economic life is 40 years and the property is already 46 years old I can conclude the plumbing and electrical are outdated as well as the quality construction of the apartment complex is too. So I know I would have to bring this stuff eventually up to date if required necessary. So not offering the seller $590,000 and offering below $508,583 would justify me to use the saved amount of $81,417 on all this if need too!

5. My Bookkeeper Hat- Says leverage the depreciation factor for the maxium of 33 years allowed as much as can. In my case I would fix up and then rent for about 5-10 years, then re-sale around the 7th or 10th year.

My point is I really like this 10 unit apartment complex, but if the seller can't accept less than $508,583 for this building then I will move on to the next real estate endeavor I find until someone agrees to what I want. So far I've bought 7 properties using my investment stats, so I know their are people out their who will honor what I want. The catch is I'm very ambitious/analytical and used that to my own advantage to gain the reasoning's to convince others to say yes to my real estate endeavors!

April

Home Shopping Totes

Hi Prospects & Friends,

I added to my Z Store some Home Shopping Bags I love using when I:

1. Make Groceries

2. Run Arrands

3. Head to Home Depot or Lowes when I'm with my contractor shopping for rental supplies for my rental properties.

4. Etc.

My shopping bags come in different designs and are available over at my Z Store on the right side of this blog. So enjoy & shop!

April

Home Teddy Bears

Hi Prospects & Friends,

I wanted to introduce my Home Teddy Bears for sale for $13.99 over @ my C Store on right side of my blog or by clicking http://www.har.com/acoletteharrisprpts then C Store. The bears come in designs of homes and maybe used however like. Listed below are some areas I listed that would be great for sending the bears too:

1. Churches

2. Hospitals

3. Charities

4. Schools

5. Nursing Homes

My bears need love & a home, so whether you decide to send them to places like 1-5 or just give them to a loved one do it for a good deed & cause.

Thanks,

April

Office Condo- Investment Analysis

Hi Prospects & Friends,

First I'm trying to leverage a great location for my real estate endeavor I'm developing. I came across this office condo yesterday and analyzed these current stats:

Location- A+

Year Blt- 2009

Sq.ft.- 1,350

Rental Rate- $21.33/sq.ft./year or $1.78/sq.ft./mth

Taxes- $5,072/year

Maint Fee- $185/mth

Proposed Insurance- $250/mth

Listing price- $226,400

Depreciation Factor- 3.175 (31 years max)

So because this is a commercial property I will apply my investment analysis range stat to see if #'s work. I will use 8% & 9% since this is a commercial property & that's what rates are going for right now:

(1,350x$21.33/12=$2,400-$422-$185-$250=$1,543/7.34x1000=$210,218

(1,350x$21.33/12=$2,400-$422-$185-$250=$1,543/8.05x1000=$191,677

So my investment analysis range for this office condo equates to $191,677-$210,218. So I would not pay more than $210,218 for this office condo based on current stats. The current list price is $226,400 so it's not far from $210,218. Now I will discuss why this office condo caught my attention (besides the current stats).

*Currently has four large offices, restroom, reception area, storage closets, and kitchen. It also has an executive suite with it's own private entry and restroom*.

The office condo includes and "executive suite with it's own private entry and restroom" This highly factors in the conclusion me renting the other side out to another small business. Since my company is set up as a Single Member LLC, and I have no employees I really don't need the whole 1,350 sq.ft. of office. So this would be a great investment endeavor for me to prosper, I would setup as below:

Side A- Has 4 large offices, restroom, reception area, storage closets & kitchen. This would be where my company A. Colette Harris Properties, LLC would be.

Side B- Executive suite with it's own private entry & restroom. This would go to a small business I would rent too. My idea of a typical commercial tenant I would "seek" would be a Real Estate Attorney, Estate Planner, Insurance Agent, Accountant.

My investment stat gets tricky because I will be on 1 side of the building so I will not receive the full $2,400 just the $1,200 in rent per the rental rate/sq.ft. So I will have to reverse the stat to ($1,543+$422+$185+$250=$2,400 so my piti should not go over $2,400/mth instead of the $1,543 in this case. So now because the building would be considered owner/investor user & not 100% tenancy the investment analysis range would state do not pay more than still $210,218 for property and not have a piti of more than $2,400/mth. Applying the reversal with a down payment to the investment analysis range would now look like:

If you get property for $205,000 @ 8% with 25% down ($1,129+$422+$185+$250=$1986-$1,200 in rent=$786. So now the investment stat says instead of me paying $1986/mth (piti) for the office condo I would only pay $786/mth while the commercial tenant pays the $1,200 to equate to my total mortgage of $1,986/mth which falls below the $2,400/mth as noted earlier because of the owner/investor occupancy reversal stat. So the $1,200/mth I'm saving I can now apply to my small business with:

1. Gaining more & more skills

2. Invest in more real estate

3. Invest in stocks & index funds

3. Etc (get my point)?

Getting the right data to come up with my investment analysis stat range is quite tricky, because you have to apply the current facts and other stats, so if you don't know where to get such data to analyze from beginning it would be wise to not engage in this advanced kind of analysis with out someone with qualified skills to assist you. I will monitor this office condo, because it's a good small business move real estate endeavor for me to pursue once it falls in to my investment analysis stat parameters.

So as you can see applying these posts below I've written on this blog to this one can allow one to create wealth the smart way.

Investment Analysis- "Victorian Mini Mansion"

Investment Analysis- "Fourplex"

P.S. I've attached my 2010 calendar I sell over @ my Z Store with my personal real estate quotes. Check it out on right side of my blog thanks!

April

Framed Wall Tiles- AchEmpire Brand

Hi Prospects & Friends,

I'm introducing my Framed Wall Tiles I sell over @ my C Store for $11.99 on my AchEmpire Channel @ http://www.youtube.com/AchEmpire see them @ http://www.youtube.com/watch?v=OgI2mekRBP8

Framed Wall Tiles maybe hung in:

1. Family Room

2. Kitchen

3. Home Office

4. Living Room

5. Gameroom

6. Library

7. Guess Room

8. Dining

9. Study

10. Or hang where ever you like

They come in a variety of designs and maybe purchased over @ C Store on right of this blog!

"Attracting & Keeping" Longterm Tenants

Hi Prospects & Friends,

I wanted to share how important it is to have the benefits of having longterm tenants. I recently called one of my tenants who has been leasing from me since December 2004 and asked him if he was going to renew his lease since it expires 12/31/2009? He said yes and to send the renewal, so I immediately typed the renewal lease form that same day and mailed it off, his new lease will expire 12/31/2010. As I typed his renewal I started to drift back to 2004 and thought about the hard work and skills I managed to learn that allowed me to "seek" him from the very beginning. He is now on his 6 renewal with me and I know many find it hard to find longterm tenants, but in my case I apply techniques I've created myself and tailor them to each individual differently by basing such on their situation. See my "Qualified Crafted Tenant Equation" blog post dated 10/11/09 and view of http://www.youtube.com/watch?v=gdd_bhZ3bcY to see my point. Knowing the right skills to apply from the very beginning will land you a much better reward "longterm tenant" futuristically.

This recession is very tricky and having "longterm tenants" will weather you through the storm. I've owned this property since October 2003 and have gained greatly from it. I've only had 2 tenants leasing from this property. The first tenant was from October 2003-November 2004, and the second tenant was from December 2004 to present. So as you can see I've leased this property with no loss time or rent between the leases from the tenants. I have a trick to that and it involves me putting a "special clause" in all my leases. My "special clause" is something that "keeps" the longterm tenant, while the qualified crafted tenant equation "attracts" the tenant.

I will write a book soon about this, till then visit http://www.har.com/acoletteharrisprpts and click ACHP Published Books & ACHP EBooks and prosper from what I've already wrote so far.

April- Real Estate Broker

Investment Analysis- "Victorian Mini Mansion"

Hi Prospects & Friends,

I noticed this mini mansion last weekend on the market and I will drive by it this weekend, because it's a beautiful home and also because it has nice home stats. It caught my eye due to the seller just reduced the listing price $50,000 and is including the furniture in the package. This is a subdivision I've studied over the years and many homes don't come available often. I did my analysis on this home so see the stats below:

Original Listing Price $349,900

Seller Reduced Just Last Week: $50,000

New Listing Price: $299,900

Year Built- 1982

Gross Sq.ft.- 4,294

Bedrooms- 5

Bathrooms- 3.5

Garage- 3 car attached
Lot- 12,100 sq.ft.

Yearly Taxes With Homestead Exemption- $6,252

Yearly Maintenance- $500

Proposed Insurance- $250/mth

Rent/last 6mths- $0.54

Price/sq.ft./last 6 mths- $81.15

5 Year S.M.A. Low- Occurred 11/30/04 @ $58.92/sq.ft.

5 Year S.M.A. Peak- Occurred 4/17/06 @ $87/sq.ft.

Market in last 6 months says this home is worth $348,458, seller has new listing price @ $299,900 including the furniture. So it is an enticing deal, but as a broker/realtor I have to put my hat on as a buyer/investor first. So for me this home needs to come down to my range of $$268,886-$284,643 for me to touch it, because of the recession and market trends I've studied for this subdivision. So I will use rates of 4.8% and 5.35% since the market is saying that's what rates are going for right now at this point. See equations explaining:

(4,294 sq.ft x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.29x1000=$284,643)

(4,294 sq.ft. x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.60x1000=$268,886)

So since my range is $268,886-$284,643 and seller originally had it listed for $349,900 and now it's listed at $299,900, and the low was $58.92 and high was $87 in past 5 years. I can conclude right now the price is perfect, but because I like to build instant equity, home needs to fall in my range to make numbers work for me. So seller isn't too far from my $284,643 since it's now listed @ $299,900 and if they continue to reduce the price who knows it may get as low as my other part of my range which is $268,886. The 5 year S.M.A. comes out to for this home see equation below:

4,294 sq.ft. x $58.92=253,003

4,294 sq.ft x $87=$373,578

So I can analyze from the 5 year S.M.A. this home will hit back around $373,578+ when the recession is over and max of 5 year trend from that moment, and I can also conclude this home could possibly wonder down to $253,003 if the recession still lingers, but in this case trying to see a $58.92/sq.ft in this subdivision won't be possible since the price/sq.ft. last 6 months is $81.15. So the only way to win in this case is to watch for sellers like this one and realize they are listing it at $69.84/sq.ft but it's really selling for $81.15/sq.ft as per the price/sq.ft. in last 6 months. Remember this home isn't a foreclosure, so these are rare deals when you find seller doing this. This home is already fixed up and remodeled, so buying this home from the seller right now at their price would be $81.15x4,294/sq.ft. =$348,458-$299,900=$48,558.10 of instant equity which isn't including your down payment if you homestead this home for 2+ years and didn't sell until the price/sq.ft. reverts above $81.15/sq.ft.

If you use my range of $268,886-$284,643 & wait for the subdivision to peak back @$87+/sq.ft. it will calculate to 4,294/sq.ft x $87=$373,578 & instant equity ranging from $88,935-104,692. You would need to at least stay in the home and not flip, to gain this subdivision investment rewards, since it goes through troughs and ridges. I would stay @ least 5 years then roll equity over into another one like this till I landed $500,000 in equity and proceed with next project or till I'm satisfied with what I want. Some of you are thinking how can she get $500,000 in equity? Well lets just take a refresher course, my range is $268,886-$284,643, and seller has already marked property down from $349,900 to $299,900. The $299,900 isn't too far from my range of $268,886-$284,643 which equates to $88,935-$104,692 in equity. So once I see the seller lower close to $284,643 I know I already I got $88,935 in instant equity sitting pretty for me when I sell when the peak reaches back to $87+/sq.ft. Remember right now the price/sq.ft is $81.15 in last 6 months, not $69.84/sq.ft. which is what the seller is wanting right now. So understanding all of my analysis stats in advance will further you alot quicker. So yes finding 5 sellers like this one will land you $444,675 in instant equity ($88,935x5=$444,675, and that is just the high end part of my range for this house. Low end will equate to $373,578-$268,886=$104,692 in instant equity which is $104,692x 5 sellers=$523,460, and also remember I haven't factored in down payments. So if the house alone is giving you between $88,935-$104,692 imagine just adding a measely down payment of 3%+ to all that instant equity you already got? So lets use reverse psychology, my range of $268,886-$284,643 with a down payment of 3% which equates to a down payment range of $8,067 -$8,539, says: my analysis stat range of $268,886-$284,643 will only cost you as little as a down payment range of $8,067-$8,539 to gain a range of instant equity of $88,935-$104,692, which then equates to instant equity range of $97,002-$113,231 (down payment + the instant equity)

So for this to work you have to have the subdivision investment analysis already factored, and then the sellers are the "Jewels" when they do stuff like this in these kinds of subdivisions.

P.S. If you add this article with my "Investment Analysis- Fourplex" you could actually be quite wealthy, because the seller over at that article is doing the samething, but difference is this is a home you would homestead to live in, and the fourplex would be an investment property you rent out to generate monthly income.

April

Investment Analysis- Fourplex

Hi Prospects & Friends,

I came across a property I've been watching mid of this year and wanted to share the investment analysis to understand why I'm still watching it. Currently the Fourplex is listed for sale and see stats below:

Listing Price- $279,900

Gross Sq.ft.- 5,832

Fourplex Components- Has four 2br/2ba on each side

Year Built- 1984

Yearly Taxes- $6,017

Projected Insurance- $275/mth

Price/sq.ft last 6mths- $54

Rent/sq.ft. last 6 mths- $0.54

Calculate- 5% for reserves

Misc- Location A+ (Has main drag & inferior to schools/restaurants/parks/malls/churches/etc)

Market says property should be worth $315,000 ($54 x 5,832 sq.ft.)

Market says rent should be worth $3,149 or $787 per unit ($0.54 x 5,832 sq.ft. /4=$787)

Current Owner/Landlord is renting units at $695 & $625 with long term tenants in signed lease contracts. So $695 x 2 + $625 x 2=$2,640/mth in contract rent. Well since the market in last 6 months says this property is worth $54/sq.ft. & owner has it listed for $47.99/sq.ft I still will not settle for $279,900. Price needs to come down to my investment analysis range of $215,155-$235,967, because yes as a broker/realtor the $54/sq.ft is enticing since it's really worth $315,000 and seller is listing it for $279,900, but trick is my investor hat is on right now and not the broker/realtor hat (that hat will be put on when I sell). My investor hat says see investment analysis below:

Ignore the market rent at $0.54/sq.ft, since the current owner has tenant signed contracts at $0.45/sq.ft. (by law you have to honor lease contracts, until they expire) So I will work with the $0.45/sq.ft instead knowing I know as a broker/realtor the market rent is really $0.54/sq.ft in last 6 months. So I will demonstrate at a 8% and 9% since rates are higher on investment properties, and no points were applied/involved/factored ($2,640-$501-$275-$132/7.34x1000=$235,967)

($2,640-$501-$275-$132/8.05x1000=$215,155)

So my investment analysis range of $215,155-$235,967 on a property currently being listed for $279,900 and really worth $315,000 is a good real estate endeavor to understand and learn to apply to your investment properties. Since seller already has property marketed below market why not wait for seller to continue to reduce your "Jewel Investment Property" to your range? You cant loose in this investment scenario, because seller already has 4 plex listed at $279,900 and it's really worth $315,000. I like to build instant equity so that's why I like to use my investment analysis range equation, while I also apply these rules:

Depreciation Factor- 27 years maxium for this investment property

Maxium life Expectancy- 40 years (it can go beyond this if it's been well cared for with the plumbing & electrical)

Building is already 25 years old, so that leaves me to work with 15 years if I was to buy it now in 2009, and if it falls in my range of $215,155-$235,967 (I would keep it at least 2-5 years out of the 15 years, for capital gain tax rules and market subdivision trend analysis conclusions). So since I already know it's got $35,100 in equity (based on the $279,900 minus market) and can factor in the repairs once analyze the inspection report with inspector/contractor/electrician/plumber I wouldn't want to touch the $35,100. So if I'm told it will cost $15,000 to update the 4 plex eventually with repairs then you can see why my range makes since of $215,155-$235,967 from the beginning of analyzing the 4 plex. My range is also actually saying in hidden numbers if seller lowers to my range I can earn in equity a range between $79,033-$99,845 & that's not including my down payment, instead of the $35,100 which is based on the $279,900 which is already below market, but not below enough for me to touch. I've bought 7 properties using this investment analysis equation and it does build your equity faster if you apply your numbers correctly from very beginning. Also since I'm a broker/realtor and represent myself in my transactions I just take the commission and apply it to any needed repairs and deduct it as an expense against my salary for managing the property, as well as the maintenance expenses for the property. I will write a book in detail about this soon. Till then check out my "Create Wealth From A Foreclosure Homestead" book & ebook on right currently for sale.