Real Estate Investment in South East Michigan

1. Opportunity Review -
Detroit Market
Investment Strategy

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• Sustainable income production.
• Successfully grow assets.
Vision Statement

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• Goal: Financial independence
• Objective: Sustainable growth of over 30% on invested capital a year.
• Rule of 72 (72 divided by on 30% annual return on ROA = 2.4 or money doubles
every 2 years)
• Goal is not guaranteed
• Objective: Grow assets by 20% a year.
• Example: $1M Year 1, $1.2M Year 2, $1.24M Year 3, etc.
Goals and Objectives

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• High Risk/Return
• Project / BuildValue (Hands On)
• Low Risk/Return
• Lower CAP – High Quality Buildings
Available Options

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• Search Broker Sites (to find opportunities)
• Commission to seller agent.
• Direct Solicitation to Owners to Sell
• Look for existing businesses that will pay off the real estate.
• FindVacant Properties
• Incorporate business into the vacant property.
Strategy

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Investor Sentiment
http://www.marcusmillichap.com/research/Reports/National/MM_NREI_2H13_CREInvestorSentiment.pdf

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Expectations for Commercial Property
Values
http://www.marcusmillichap.com/research/Reports/National/MM_NREI_2H13_CREInvestorSentiment.pdf

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Project Properties
http://www.marcusmillichap.com/research/Reports/National/MM_NREI_2H13_CREInvestorSentiment.pdf

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• Example of Decision Matrix Approach used to Prioritize Investment Options
• Lower Risk and Higher CAP
Investment Grade Opportunities
Tenant City Asking Price SFT $/SFT CAP
Remaining
Lease
Offer Down Financed Cash In Debt Service G Profit Expenses Net
Cash
Return
on Gross Expansion
CVS + Warren $3,465,000 38408 $90.22 11.59% 5 3,200,000$ 800,000$ 2,400,000$ 401,594$ 190,000$ 211,594$ 5000 206,594$ 3.8 Yes
Chemico Chesterfield $2,416,000 107536 $22.47 10.00% 4.75 1,800,000$ 450,000$ 1,350,000$ 241,600$ 107,000$ 134,600$ 5000 129,600$ 3.3
T Mobile Rosevillle $850,000 5050 $168.32 10.16% 5 750,000$ 187,500$ 562,500$ 86,360$ 45,000$ 41,360$ 41,360$ 4.5
Office Max Midland $1,400,000 23500 $59.57 11.59% 4 1,300,000$ 325,000$ 975,000$ 162,260$ 78,000$ 84,260$ 9000 75,260$ 3.9
Pizza Hut Troy $585,600 2730 $214.51 9.00% 2 500,000$ 125,000$ 375,000$ 52,704$ 30,000$ 22,704$ 2000 20,704$ 5.5
TYME Engineering Livonia $500,000 10000 $50.00 10.00% 5 450000 112,500$ 337,500$ 50,000$ 27,000$ 23,000$ 4000 19,000$ 4.9

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Example of Million Dollar Property
Note: There is no guarantee that the property will increase in value
0
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Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Model for 10% CAP Fully Leased $1M Building
Core Investment Down Payment (2%) Revenue (3%) Reserves 25% Pay Down on Capital

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Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
10-Year Model For 100% Leased $1M Property
Core Investment Down Payment Revenue Reserves 25% Pay Down on Capital Accumulated Payouts
Accumulated Value over 10 Years
Note: There is no guarantee that the property will increase in value

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Detroit Market

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Population Trend

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Population Trends

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Median Income

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Detroit Population/Income

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• Determine investment goals & objectives.
• Determine available & necessary resources.
• Determine opportunities and evaluate/prioritize.
• Negotiate.
• Execute.
• Repeat.
Conclusion