Why own real estate? Real Estate Analysis –Approximate valuations Case Studies –Case 1: Buying an apartment building* –Case 2: Selling apartment building to management company* –Case 3: Buying stock in a company that owns the apartment building* –ROI Example* –Value Added Investment Example * Taxes and depreciation were intentionally left out for simplicity

Return consists of property rental revenue and property appreciation Control over your investment (can add value through improvements, monitor costs, etc) Historically a strong hedge against inflation Tax incentives (interest, closing costs, etc are tax- deductible)

“100 Rule” Approximation –Multiply 1 month’s rent by 100 –Actual value varies depending on building age, location/appreciation rates, etc. Traditional valuation: –Discounted cash flow –Comparative Transaction Multiples ($/SF) Quick Comparisons: “Cap Rate” –Operating Income / Purchase Price, aka (EBITDA / EV) Which one is right? How do you choose?

1.Buy a distressed property in a good location at a fair price for it’s condition –Buy from Trusts, Estates, personal contacts, etc 2.Remodel the building and bring it up to date –There are many fixes you can do that make a big difference without costing a lot (i.e. refinishing floors, repainting, new trim and add crown molding, new fixtures, new appliances, knock out a wall to make it feel bigger, etc) 3.Rent the refinished units at multiples of their previous rent rate