Apartment Presentation

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Apartment Presentation

  1. 1. Apartment Investment Opportunities Presented by Brian D. Swope 18 Year Real Estate Investment Expert
  2. 2. Metro Development - Who We Are Part of a development and construction company with 39 years of experience in Central Ohio.
  3. 3. <ul><li>Built residential condominiums across Central Ohio </li></ul><ul><li>Built and maintain 5,000,000 square feet of commercial space </li></ul><ul><li>Built private athletic clubs and golf courses </li></ul><ul><li>Built hotels at Port Columbus International Airport and across Ohio </li></ul><ul><li>Built over 40,000 multi-family units </li></ul>Metro Development LLC Who we are and what we’ve done
  4. 4. Apartment Communities Sawmill Ravine Fieldstone Trace Lakes Edge Enclave at Albany Park Edgewater Place Cameron Ridge Polaris Crossing Sawmill Crossing Winchester Park
  5. 5. Winchester Park <ul><li>344 units </li></ul><ul><li>Columbus, Ohio </li></ul><ul><li>Hamilton Road & SR 33 – Groveport area </li></ul><ul><li>Phase 1 completed October 2008 </li></ul>
  6. 6. Why Today Is An Especially Good Time To Own Multi-family Property In Central Ohio
  7. 7. Why Today Is An Especially Good Time To Own Multi-family Property In Central Ohio 5 Year Constant Maturity Treasury Rate Plus the Banks’ Normal Margin of 2.25% Low Commercial Interest Rates
  8. 8. What Happens When Single Family Sales are Slow? <ul><li>1. Fewer people are able to purchase their first house </li></ul><ul><ul><ul><li>House purchases are delayed </li></ul></ul></ul><ul><ul><ul><li>Apartment leases are extended </li></ul></ul></ul><ul><li>3. Apartment Occupancy rates increase </li></ul><ul><li>4. Apartment Monthly rents increase </li></ul><ul><li>5. Apartment values increase </li></ul><ul><li>Also, fewer apartments are constructed due to: </li></ul><ul><ul><ul><li>Financing becoming more difficult for builders </li></ul></ul></ul><ul><ul><ul><li>Construction costs increases </li></ul></ul></ul><ul><ul><ul><li>Land is hard to come by </li></ul></ul></ul>
  9. 9. Why Today Is An Especially Good Time To Own Multi-family Property In Central Ohio <ul><li>Apartment vacancies in Columbus are forecast to finish the year at 6.5%, down 10 basis points from a year ago. </li></ul><ul><li>Marcus & Millichap Market Update </li></ul>
  10. 10. 15-year Historical Rates of Return from Sept ‘93 – Sept ‘08 With the Volatility of the stock market. You MUST Diversify With Real Estate
  11. 11. Why Today Is An Especially Good Time To Own Multi-family Property In Central Ohio *2008 Forecast Home sales and permits have decreased while the population of Columbus continues to rise.
  12. 12. Why Today Is An Especially Good Time To Own Multi-family Property In Central Ohio Marcus & Millichap Research Services *Forecast Year-Over-Year Change Fewer apartments are being built: less competition = higher rents Asking Rent Rents in 2008 are forecast to increase 4.9% month as rent concessions recede.
  13. 13. Central Ohio Apartment Market <ul><li>1. No geographic boundaries to impede growth </li></ul><ul><li>2. No state lines to contend with </li></ul><ul><li>3. Strong influx of new people coming to Columbus </li></ul><ul><li>• 9 universities, colleges & tech schools </li></ul><ul><li>4. Consistent annual increases in rent </li></ul><ul><li>5. Consistently stable occupancy rates </li></ul><ul><li>6. Diversified Economy </li></ul><ul><li>Large employers </li></ul><ul><ul><ul><li>Ohio Health, Nationwide, Honda, Ohio State University, state, county and city governments </li></ul></ul></ul><ul><li>Transportation hub growth - </li></ul><ul><li>Rickenbacker Airport & crossroads of two interstate highways </li></ul><ul><li>7. High quality of life </li></ul><ul><li>• Schools </li></ul><ul><li>• Hospitals </li></ul><ul><li>• Services </li></ul>
  14. 14. Four Ways Real Estate Generates Income Example: 16 unit building, but the results are the same for any number of units (4,8,12,etc.)
  15. 15. Lake Club Apartments Case Study <ul><li>432 units </li></ul><ul><li>Lewis Center, Ohio </li></ul><ul><li>Polaris Parkway & E. Powell Road </li></ul><ul><li>Completed 1992 </li></ul>
  16. 16. Cash Flow Cash On Cash Return Cash Flow ÷ Downpayment = Return on Investment Subject Property – Lake Club Purchase Price: $659,900 20% Downpayment: $131,980 Year 1 2 3 4 5 Cash Flow 14,846 (11.25% ) 14,846 (11.25%) 14,846 (11.25%) 14,846 (11.25%) 14,846 (11.25%) <ul><li>Advantages: </li></ul><ul><li>Can be compared with the dividends on stock, interest payments on a bond, etc. </li></ul><ul><li>Simple to calculate </li></ul><ul><li>Appeals to all investors because they are usually cash-oriented </li></ul>
  17. 17. Return On Your Investment The First 5 Years 2.8% Appreciation 18,477 (14.0%) 18,995 (14.4%) 19,526 (14.8%) 20,073 (15.2%) 20,635 (15.6%) Year 1 2 3 4 5 Appreciation Subject Property – Lake Club Purchase Price: $659,900 20% Downpayment: $131,980 <ul><li>The amount of money the property is worth after your holding period </li></ul><ul><li>This is calculated on the entire investment not just your downpayment </li></ul>
  18. 18. Principal Reduction Subject Property – Lake Club Purchase Price: $659,900 20% Downpayment: $131,980 <ul><li>The amount of money that your tenants pay on a monthly basis in their rent that goes to pay off your loan. </li></ul>Return On Your Investment The First 5 Years 25 Years Principal Reduction 6,383 (4.84%) 6,947 (5.26%) 7,561 (5.73%) 8,229 (6.24%) 8,957 (6.79%) Year 1 2 3 4 5
  19. 19. Tax Deferral <ul><li>1031 tax free exchange </li></ul><ul><ul><li>- 45 days to identify </li></ul></ul><ul><ul><li>-180 days to close on the property you have identified </li></ul></ul><ul><li>Seek tax advice from a professional </li></ul>
  20. 20. The Flexibility of Leveraged Property
  21. 21. The Flexibility of Leveraged Property <ul><li>LEVERAGE - You can use other people’s money (lender) to purchase the property. You use other people’s money (tenants) to pay off the lender. </li></ul><ul><li>You can prepay your loan with no penalty. </li></ul><ul><li>You can refinance the entire loan to gain access to your built up equity. Receive back you initial downpayment and continue to receive positive cash flow. </li></ul><ul><li>You can pay off the loan completely and hold on to the property for cash flow. </li></ul><ul><li>You can use built up equity as collateral to obtain a line of credit or to help you finance additional investment property. </li></ul><ul><li>You can trade your property for another and defer your taxable gain. </li></ul><ul><li>You can sell and cash in your investment. </li></ul>
  22. 22. The Power of a Leveraged Investment <ul><li>$1 invested in the stock market = </li></ul><ul><li>$1 out of pocket </li></ul><ul><li>$1 invested in real estate = </li></ul><ul><li>20¢ out of pocket </li></ul>
  23. 23. Total Rate of Return
  24. 24. <ul><li>Takes into account ALL sources of cash flow and income including cash flow, appreciation and principal reduction </li></ul><ul><li>Is applied over the entire projected holding period of an investment </li></ul><ul><li>Recognizes the time value of cash flows of your entire investment </li></ul><ul><li>It is the true measure of yield that is widely recognized throughout the industry </li></ul>Total Rate of Return
  25. 25. Total Rate of Return Example: Lake Club Return On Your Investment First 5 Years Cash flow first 2 years ( 25 year loan ) 16 Two bedroom apartments Purchase Price $659,900 Down Payment $131,980 Loan Amount $527,920 INCOME One Bedroom 0 $495 $ 0 Two Bedroom 16 $535 $ 8,560 Garage Income 4 $ 50 $ 200 Gross Monthly Income $ 8,760 Annualized x12 Gross Potential Income $ 105,120 Less Vacancy 5% $ 5,256 Net Effective Income $ 99,864 $ 99,864 EXPENSES: Real Estate Taxes (est.) $ 10,100 Insurance $ 1,558 Leasing Agents/On-site & Res.Mgrs./Maint. Labor $ 5,861 Pool & Clubhouse $ 960 Telephone/Credit Bur./Prof. Fees/Rental Suppl./ Forms $ 1,200 Lawn/Snow/Landscape./Refuse/Flowers/Ext. Maint. $ 1,600 Parts for Repair and Maintenance $ 880 Painting, Cleaning and Decorating $ 2,200 Utilities: Unbilled Water and Sewer/Vacant Elec. $ 3,925 Management Fee 2% $ 1,997 Promotions/Advertising/Concessions $ 1,230 Athletic Club Memberships $ 2,496 Principal and Interest (8.50% For 25 Years) $ 51,011 Total Expenses $ 85,018 $ 85,018 CASH FLOW $ 14,846
  26. 26. Total Rate of Return Example: Lake Club Return On Your Investment First 15 Years (20% Downpayment = $131,980) = + + Total Return 39,706 (30%) 44,438 (34%) 44,391 (34%) 48,774 (37%) 2.8% Appreciation 18,477 (14.0%) 20,635 (15.6%) 23,690 (18.0%) 27,198 (20.6%) 25 Years Principal Reduction 6,383 (4.84%) 8,957 (6.79%) 5,855 (4.44%) 6,730 (5.10%) Cash Flow 14,846 (11.25%) 14,846 (11.25%) 14,846 (11.25%) 14,846 (11.25%) Year 1 5 10 15
  27. 27. Lake Club Apartments 25 Year Loan $659,900 $527,900 $736,971 $846,089 $971,363 $489,823 $464,588 $434,908 $131,980 $247,148 $381,501 $536,455 15 Year Analysis - 2.8% Appreciation Purchase Date Purchase Price Downpayment Mortgage Amount End of Year 5 $659,900 ($131,980) $527,900 End of Year 10 End of Year 15
  28. 28. Winchester Park Apartments New Project Pro Forma - 30 Year Loan - 4 Two-Bedroom Premier Units
  29. 29. Winchester Park Apartments Cash flow first 2 years ( 30 year loan ) 4 Two Bedroom Apartments Purchase Price $272,000 Down Payment $ 54,400 Loan Amount $217,600 INCOME: One Bedroom 0 $ 0 Two Bedroom 4 $755 $ 3,020 Garage Income 1 $ 50 $ 50 Gross Monthly Income $ 3,070 Annualized x12 Gross Potential Income $ 36,840 Less Vacancy 5% ( $ 1,842) Net Effective Income $ 34,998 $ 34,998
  30. 30. Winchester Park Apartments Cash flow first 2 years ( 30 year loan ) 4 Two Bedroom Apartments Purchase Price $272,000 Down Payment $ 54,400 Loan Amount $217,600 INCOME: One Bedroom 0 $ 0 Two Bedroom 4 $755 $ 3,020 Garage Income 1 $ 50 $ 50 Gross Monthly Income $ 3,070 Annualized x12 Gross Potential Income $ 36,840 Less Vacancy 5% ( $ 1,842) Net Effective Income $ 34,998 $ 34,998 EXPENSES: Real Estate Taxes (est.) $ 4,200 Insurance $ 424 Leasing Agents/On-site & Res.Mgrs./Maint. Labor $ 2,032 Pool & Clubhouse $ 400 Telephone/Credit Bur./Prof. Fees/Rental Suppl./ Forms $ 1,324 Lawn/Snow/Landscape./Refuse/Flowers/Ext. Maint. $ 1,444 Parts for Repair and Maintenance $ 200 Painting, Cleaning and Decorating $ 4,816 Utilities: Unbilled Water and Sewer/Vacant Elec. $ 664 Management Fee 0% $ 0 Promotions/Advertising/Concessions $ 936 Concessions/Miscellaneous* $ 300 Principal and Interest (6.75% For 30 Years) $ 16,936 Total Expenses $ 29,768 $ 29,768
  31. 31. Winchester Park Apartments Cash flow first 2 years ( 30 year loan ) 4 Two Bedroom Apartments Purchase Price $272,000 Down Payment $ 54,400 Loan Amount $217,600 INCOME: One Bedroom 0 $ 0 Two Bedroom 4 $755 $ 3,020 Garage Income 1 $ 50 $ 50 Gross Monthly Income $ 3,070 Annualized x12 Gross Potential Income $ 36,840 Less Vacancy 5% ( $ 1,842) Net Effective Income $ 34,998 $ 34,998 EXPENSES: Real Estate Taxes (est.) $ 4,200 Insurance $ 424 Leasing Agents/On-site & Res.Mgrs./Maint. Labor $ 2,032 Pool & Clubhouse $ 400 Telephone/Credit Bur./Prof. Fees/Rental Suppl./ Forms $ 1,324 Lawn/Snow/Landscape./Refuse/Flowers/Ext. Maint. $ 1,444 Parts for Repair and Maintenance $ 200 Painting, Cleaning and Decorating $ 4,816 Utilities: Unbilled Water and Sewer/Vacant Elec. $ 664 Management Fee 0% $ 0 Promotions/Advertising/Concessions $ 936 Concessions/Miscellaneous* $ 300 Principal and Interest (6.75% For 30 Years) $ 16,936 Total Expenses $ 29,768 $ 29,768 CASH FLOW: $ 5,230
  32. 32. Return On Your Investment The First 5 Years (20% Downpayment = $54,400) Cash Flow 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) Year 1 2 3 4 5
  33. 33. Return On Your Investment The First 5 Years (20% Downpayment = $54,400) 30 Years Principal Reduction + 2,319 (4.26%) 2,480 (4.56%) 2,653 (4.88%) 2,837 (5.22%) 3,035 (5.58%) Cash Flow 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) Year 1 2 3 4 5
  34. 34. Return On Your Investment The First 5 Years (20% Downpayment = $54,400) 30 Years Principal Reduction + + 2.8% Appreciation 7,616 (14.0%) 7,829 (14.4%) 8,048 (14.8%) 8,274 (15.2%) 8,505 (15.6%) 2,319 (4.26%) 2,480 (4.56%) 2,653 (4.88%) 2,837 (5.22%) 3,035 (5.58%) Cash Flow 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) Year 1 2 3 4 5
  35. 35. Return On Your Investment The First 5 Years (20% Downpayment = $54,400) = 30 Years Principal Reduction + + Total Return 15,165 (30%) 15,539 (30%) 15,931 (31%) 16,341 (32%) 16,770 (33%) 2.8% Appreciation 7,616 (14.0%) 7,829 (14.4%) 8,048 (14.8%) 8,274 (15.2%) 8,505 (15.6%) 2,319 (4.26%) 2,480 (4.56%) 2,653 (4.88%) 2,837 (5.22%) 3,035 (5.58%) Cash Flow 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) 5,230 (9.61%) Year 1 2 3 4 5
  36. 36. Winchester Park Apartments 30 Year Loan $272,000 $217,600 $303,768 $348,744 $400,380 $204,534 $185,980 $160,002 $54,400 $99,234 $162,764 $240,378 15 Year Analysis - 2.8% Appreciation Purchase Date Purchase Price Downpayment Mortgage Amount End of Year 5 $272,000 ($54,400) $217,600 End of Year 10 End of Year 15
  37. 37. Criteria For Investment
  38. 38. Excellent Locations Location Example: Winchester Park <ul><li>At an exit off SR 33 </li></ul><ul><li>Close to Rickenbacker Airport & its distribution hub </li></ul><ul><li>Adjacent to new Giant Eagle & other retail </li></ul><ul><li>20 minutes to Lancaster or downtown Columbus </li></ul><ul><li>City utilities </li></ul><ul><li>Near two Metro Parks </li></ul>
  39. 39. <ul><li>Allows residents to pay only one utility bill and is the most affordable for them </li></ul><ul><li>Minimum service for residents </li></ul><ul><li>Minimum service charge for natural gas is eliminated and high cost of natural gas is avoided </li></ul><ul><li>No pilot lights or gas line service required </li></ul>All Electric Apartments Superior Low Maintenance Construction
  40. 40. <ul><li>Brick and vinyl-sided exterior walls </li></ul><ul><li>Aluminum-sided overhangs </li></ul><ul><li>Colonial window grids in between dual insulated glass </li></ul><ul><li>Pitched asphalt shingled roofs </li></ul><ul><li>Continuous aluminum gutters </li></ul><ul><li>Vinyl shutters and vinyl window frames </li></ul>Superior Low Maintenance Construction
  41. 41. <ul><li>Neutral nylon carpeting </li></ul><ul><li>Vinyl kitchen, bath and entry way floors </li></ul><ul><li>Color-coordinated laminate countertops </li></ul><ul><li>Frost-free refrigerators </li></ul><ul><li>Self-cleaning ovens </li></ul><ul><li>Natural woodgrain cabinets </li></ul><ul><li>Doors and trim are durable pre-finished oak tone </li></ul><ul><li>Fiberglass tub and tub walls </li></ul>Superior Low Maintenance Construction
  42. 42. Things We Do Not Have <ul><li>Electric in our garages </li></ul><ul><li>- no use of power tools </li></ul><ul><li>Garage door openers to repair or replace </li></ul><ul><li>Basements </li></ul><ul><li>- no leaks to repair </li></ul><ul><li>- no extra room to paint </li></ul><ul><li>- no question about security </li></ul><ul><li>Wood-burning fireplaces </li></ul><ul><li>- no added insurance costs </li></ul><ul><li>- no added cleaning </li></ul><ul><li>- no chimney sweep expenses </li></ul><ul><li>Screen doors </li></ul><ul><li>- no repairs or replacements </li></ul>Superior Low Maintenance Construction
  43. 43. <ul><li>Full service professional management </li></ul><ul><li>Full time leasing agents and apartment community managers </li></ul><ul><li>Implement multi-media marketing plans </li></ul><ul><li>Full time maintenance crews </li></ul><ul><li>Administrative supervisors including accounting & computer personnel </li></ul>Criteria for Investment P rofessional Property Management
  44. 44. Vacancy Rate Trends Columbus Metro vs. Ardent Property Management Marcus & Millichap Research Service *Forecast
  45. 45. Onsite amenities for the residents <ul><li>Large clubhouses with kitchens </li></ul><ul><li>Tennis courts </li></ul><ul><li>24-hour fitness centers </li></ul><ul><li>Swimming pools </li></ul><ul><li>Sand volleyball courts </li></ul><ul><li>Pool tables </li></ul><ul><li>Theatre rooms </li></ul><ul><li>Ponds </li></ul><ul><li>Walking paths </li></ul>
  46. 46. 10 Reasons to Purchase Investment Property Today
  47. 47. 10 Reasons to Purchase Investment Property Today <ul><li>Interest rates are at a 20 year low. </li></ul><ul><li>The potential return on investment exceeds that of savings accounts, cd’s and money market accounts. </li></ul><ul><li>Diversification is the key to any long term investment strategy. </li></ul><ul><li>The demand for housing in this area is outstanding with a diversified group of residents. </li></ul><ul><li>Columbus is in the top 10 apartment markets in the country. </li></ul><ul><li>Professional management for care free ownership. </li></ul><ul><li>Long history of consistent rental increases and high occupancy in Columbus, Ohio. </li></ul><ul><li>Fewer apartments are being built due to difficulty in acquiring zoned land. </li></ul><ul><li>Apartments do not go on strike. </li></ul><ul><li>You can drive by and visit your investment. </li></ul>
  48. 48. Thank you for your time. Please call me at 614-580-8688 to discuss your investment needs. We believe this information to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Investors must verify the information and bear all risk for any inaccuracies. Neither the owner/developer nor the Realtor® guarantees the market conditions or the performance of any investment. This is not an offer to sell. Some photos are representative.

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