Washington Terrace Utah (Wash) Palmdale California (Palm) Property Analysis Washington Terrace Utah (Wash) Palmdale California (Palm)
Wash Property Overview Price $1,398,700 No. Units 20 Building Size 16268 SF Price/Unit $69,935 Property Type Multifamily Property Sub-type Garden/Low Rise Property Use Type: Investment Cap Rate Pro Forma 6.90% Cap Rate Actual 4.40% Occupancy 100% No. Stories 2 Lot Size 0.85 AC 383 West 4900 South, Washington Terrace, UT 84405
Wash Background Market Data
Cap Rates for Ogden Utah Cap Rate = NOI/Price TOP SEVEN CAP RATE FACTORS Local economy, job growth, unemployment Interest rates Availability of financing Property income growth Supply/demand National economic conditions/GDP growth Risk premium of private real estate Source: Integra Realty Resources, Inc. (IRR.com)
Vacancy Rate for the Area Source: Integra Realty Resources, Inc. (IRR.com)
Comparisons Properties with 5+ units are valued by Cap Rates not Comps Asking # Units Price/Unit Sq. Ft. Price/SF Lot Size Year Built A $1,300,000 10 $130,000 16,800 $77.38 .62 AC 2006 B $1,200,000 20 $60,000 17,030 $70.46 1.22 AC 1967 Subject $1,398,700 $69,935 16,268 $85.98 .85 AC 1971 Average $86,645.00 $73.92 Median $69,935.00 Suggested $1,202,570 Properties with 5+ units are valued by Cap Rates not Comps
Approach to Forced Appreciation Invest to increase Rents Survey area for properties renting at $575-$650 Rents Upgrade outside to match surrounding properties (Curb Appeal) Upgrade interior (Carpet, Paint, Appliances, Fixtures) Reduce Expenses to 35% or less of Potential Rental Income Work with Property Managers Better Tenant Screening Find More Income Garage Laundry
Assumptions Inflation Rate- 3% Yearly Rent Increase- 2% Initial Cap Rate 4.4% Vacancy Rate 6%
Input to Financials Unit Mix 20 Units 2 bed 1 bath each Purchase Price $1,398,700 Down Payment 25% $349,675 Plus Acquistion Cost (inspection, title, etc) $41,961 Plus Loan Fee/Cost (Points, etc) $31,471 Repositioning Cost 5K/Unit $100,000 Mortgages $1,049,025 Equal Initial Investment $523,107 Mortgage Data Amount $1,049,025 Interest Rate 5.5% Amortization Period 25 Loan Term Payments/Year 12 Periodic Payment -$6,442 Annual Debt Service -$77,303.18 Unit Mix 20 Units 2 bed 1 bath each
Cash Flow Model POTENTIAL RENTAL INCOME -Vacancy & Credit Losses =Effective Rental Income +Other Income (collectable) =Gross Operating Income -Operating Expenses =NET OPERATING INCOME (NOI) -Debt Service =CASH FLOW BEFORE TAXES
Financials ROI By Year -4.1% 1.9% 2.2% 2.5% 2.9% 5 Year IRR 5% Taxable Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 POTENTIAL RENTAL INCOME $124,395 $147,600 $150,552 $153,563 $156,634 $159,767 -Vacancy & Credit Losses $7,464 $8,856 $9,033 $9,214 $9,398 $9,586 =Effective Rental Income $116,931 $138,744 $141,519 $144,349 $147,236 $150,181 +Other Income (collectable) $0 =Gross Operating Income -Operating Expenses $61,246 $51,660 $52,693 $53,747 $54,822 $55,918 =NET OPERATING INCOME $55,685 $87,084 $88,826 $90,602 $92,414 $94,263 Debt Service $77,303 CASH FLOW BEFORE TAXES -$21,618 $9,781 $11,523 $13,299 $15,111 $16,959 ROI By Year -4.1% 1.9% 2.2% 2.5% 2.9% Returns -$523,107 $649,672.48 5 Year IRR 5%
Equity Build Appreciation Equity $402,375 $431,403 $461,012 $491,212 Debt Reduction $20,109 $41,352 $63,793 $87,500 $112,544 Reposition(Change in NOI/Cap Rate) $523,312 $552,340 $581,948 $612,149 Inflation $41,961 $85,181 $129,697 $175,549 $222,777 Total Appreciation by Year $62,070 $649,844 $745,830 $844,997 $947,470 Property Value Based on NOI $1,451,400 $1,480,428 $1,510,037 $1,540,237 $1,571,042 Equity $402,375 $431,403 $461,012 $491,212 $522,017
Cash Flow
Internal Rate of Return
Equity Build
Palmdale
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Property Overview Unit Mix 4 Units 2 bed 1 bath each Price $360,000 No. Units 4 Size 3332 Price/Unit $90,000 No. Stories 2 Lot Size 7829 GRM 10.7 Cap Rate 4.8% Unit Mix 4 Units 2 bed 1 bath each 38739 E 5th ST E, Palmdale 93550
Approach to Increase Cash Invest to increase Rents Survey area for properties renting for $800 Rents Upgrade outside to match surrounding properties (Curb Appeal) Upgrade interior (Carpet, Paint, Appliances, Fixtures) Reduce Expenses to 25% or less of Potential Rental Income Work with Property Managers Better Tenant Screening Find More Income Garage Laundry
Market Comparisons Address # Units L/S Price GSI GRM Price/Unit Price/SqFt Sq Ft Lot Year Rent 38728 Larkin AV 4 $385,000 $42,000 9.17 $96,250 $123.40 3,120 8,259 1,972 760 38509 5th ST E $345,000 $37,740 9.14 $86,250 $110.58 8,276 1,973 780 38521 10th PL E $299,900 $33,600 8.93 $74,975 $124.96 2,400 7,832 1,980 625 38423 E 10th PL E $355,000 $43,500 8.16 $88,750 $92.45 3,840 7,856 1,981 950 120 E AVENUE Q7 E $375,000 $36,600 10.25 $93,750 $100.27 3,740 6,741 800 38739 E 5th ST E $360,000 10.71 $90,000 $108.04 3,332 7,829 1,969 700 Avg $351,980 Average $110.33 Median Comps are the Primary Approach for Determining Value in 1-4 Unit Properties
Financials 10% Down Purchase Price $360,000 Down Payment $36,000 Plus Acquistion Cost $7,200 Plus Loan Fee/Cost $3,240 Repositioning Cost 5K/Unit $20,000 Less Mortgages $324,000 Equal Initial Investment $66,440 Mortgage Data Amount $324,000 Interest Rate 5.0% Amortization Period 30 Loan Term Payments/Year 12 Periodic Payment -$1,894 Annual Debt Service -$22,728.86
Financials ROI -10.4% 6.2% 7.1% 7.9% 8.7% 5 Year IRR 22% Taxable Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 POTENTIAL RENTAL INCOME $33,600 $38,400 $39,168 $39,951 $40,750 $41,565 -Vacancy & Credit Losses $1,680 $1,920 $1,958 $1,998 $2,038 $2,078 =Effective Rental Income $31,920 $36,480 $37,210 $37,954 $38,713 $39,487 +Other Income (collectable) $0 $1 =Gross Operating Income $36,479 -Operating Expenses $16,095 $9,600 $9,792 $9,988 $10,188 $10,391 =NET OPERATING INCOME $15,825 $26,879 $27,418 $27,966 $28,525 $29,096 Debt Service $22,729 CASH FLOW BEFORE TAXES -$6,904 $4,150 $4,689 $5,237 $5,796 $6,367 ROI -10.4% 6.2% 7.1% 7.9% 8.7% Returns -$66,440 -6,904 4,150 4,689 5,237 173,135 5 Year IRR 22%
Equity Build Up Appreciation Debt Reduction $6,681 $13,703 $21,085 $6,681 $13,703 $21,085 $28,844 $37,000 Reposition(Change in NOI/Cap Rate) Inflation $10,800 $21,924 $33,382 $45,183 $57,339 Total Appreciation by Year $17,481 $35,627 $54,466 $74,027 $94,339 Equity $53,481 $71,627 $90,466 $110,027 $130,339 ROE -12.9% 5.8% 5.2% 4.8% 4.4%
Cash Flow Comparison
Internal Rate of Return
Equity Build Up
References Integra Realty Resources, Inc. (IRR.com) Multiple Listing Service (MLS) Bureau of Labor Statistics CCIM Site to do Business (STDB) Google Earth Realtor.com Loopnet.com