- The author analyzes the real estate company Comfort Living LLC located in Springfield, Ohio to evaluate investment opportunities and develop growth strategies. - Through an analysis of expenses, revenues, property yields, and market conditions, the author finds that Comfort Living achieves high returns on investment (43% on average for rentals in 2015) due to low acquisition and renovation costs in the Springfield market. - A ratio model is developed to determine the optimal mix of property flips and rentals, concluding that acquiring 4 additional properties for flipping and 1 for rentals in 2016 would yield the highest profit of $98,000 and meet that year's goal.

1. Alexey Topolyanskiy
Dr. Gwinn
Internship Report
Comfort Living LLC
Intro:
We are looking at privately owned real estate company, Comfort Living LLC, which is
located in Springfield Ohio. My main responsibilities are assisting my employer in coming up with
growth strategies, analyzing profitability of current real estate portfolio, setting growth goals to meet
financial goals, and comparing Comfort Living to other investments to attract investment capital. We
are trying to see how investing in this company would benefit investors. In order to define this, we
implemented necessary analysis of expenses and revenues and then relate the results to market
conditions.
Summary
 There are two main sources of income: rentals and flips. Flips are the source of quick
money, basically liquidity, and rentals contribute to long-term earnings, retirement
money. To keep the business going it is important to note that it is better to reinvest net
revenue back into this business so that future possible deals could be efficiently financed.
This way of financing can be named creative investing through land contracts.
 The main goal of this analysis is to come up with the right and reasonable model that can
serve as the attraction source for investors. We decided to compile a simple model
through finding the right ratios for number of flips and rentals. Basically, we are looking
at what combination of rentals and flips will bring the company to the highest level of
profits. These ratios will serve investors as a guiding process.
 To measure the profitability of the company, we measured ROI of each rental property and
net revenue of flips. We also looked at different counties in Ohio to find annual yields and
compare them to Comfort Living’s assets. The results were to some extent shocking. While
average annual gross yield of Ohio was 11%, average yield of a rental property under
Comfort living supervision is 43% in 2015. While these results may seem unrealistic, we
managed to do some research and define some important sources of these outstanding results.
First of all, there is a high level of foreclosures. It means that lots of Springfield properties
were left behind as many dwellers were moving out of Springfield. As a matter of fact, they
could not afford paying for the mortgage. There is also a population plateau phase that we are
observing nowadays. Because of that, proportionately there are now more houses available
that Comfort Living is acquiring in a form of inventory. Because of a reduced population,
different jobs move out from Springfield area. These factors contribute to more efficient

2. deals in a real estate industry of Springfield. As a result, demand for real estate here is
inelastic, because there are not many candidates for certain pieces of property. Also, the
beneficial factors covered above lead to lower initial prices, low investment expenses, while
it is still possible to keep rental prices on a reasonably high level. Also, Comfort Living relies
on high occupancy rates, which do attract investors. Even though people are generally
moving out of Springfield, inelastic demand makes it easier to manipulate good deals and
find right customers. All these factors contribute to beneficial market conditions. Investing in
cheap houses with a good equipping strategy creates a competitive advantage in the certain
area. Thus, if the planned strategy of attracting more investors and thus customers works,
more deals will be in play.
 We will provide a numeric proof of our analysis and based off that we will make a plan
for next a couple years. The idea of finding the right flip-to-rental ratio is that it is better
to invest in a diversified company, which reduces the default and other risks in case
economy conditions get worse. The split between investors in the future will be based on
future income, occupancy rates, and economic conditions. Through the competitive
advantage we want to keep low total investments and affordable market conditions in the
area of Springfield with high rental rates. Because of the current system of business and
Springfield demographics, it is hard to provide the company with enormous amount of
inventory. Thus, based on the history of inventory rentals and sales, we do not tend to
buy more than 5 additional properties for renting and selling in 2016. However, we plan
to increase the number of additionally bought properties through efficient investing and
cash management in next years.
 After calculating average total expenses for flips and rental, we followed the ratio model
to determine how much income different combinations are going to bring to the
company. The most profitable ratio was 4 flips and one rental. This combination is going
to bring extra $98,000 dollars in profit in 2016 including cash that was already available
at this point. Our goal for 2016 was $200,000. This goal is going to be almost reached
with the chosen ratio. We hope that thanks to favorable market conditions and low
investment costs, we will be able to bring our profit to even higher levels in years from
2015 to 2020 through contributing to a certain growth of the company. Before looking at
the ratios, the model, and the growth rate for next five years in details, we should look at
some numbers.
Figures and their analysis
Figure 1:

3. Average flip net $23,124
Average flip total investment costs $17,875
Average number of months to flip the
house
6 months
In figure 1 we can see that due to inelastic demand for housing in Springfield, Comfort
Living manages to buy houses and renovate them efficiently, thoroughly and charge relatively high
prices for renting them without affecting customer attraction. Just in 1980 the population of
Springfield was about 80,000. Now it went down to 60,000. Since people are moving out and
population of Springfield is decreasing, it is easier to manipulate the prices for these assets.
Figure 2:
Date of
purcha
se
Date
rented
Rental
property
Yearly revenue
(monthly net
revenue*12 months)
Yearly Expense
(fixed + variable)
Net revenue (yearly
revenue – yearly
expense)
ROI 2015
(yearly net
revenue / total
investment)
ROI
2016-
2020
1/8/2013 8/21/13 52 Fernwood
(Dayton, OH)
521*12 = $6,252 1,938+597 = $2,535 $3,717 29% 29%
10/31/13 2/24/14 508 Parkwood
(Dayton, OH)
700*12 = $8,400 2,164+670 = $2,834 $5,566 44% 44%
9/18/13 9/4/13 30 Siebenhaler
(Dayton, OH)
850*12 = $10,200 1,886+187 = $2,073 $8,127 73% 73%
2/3/2015 3/4/15 235 E. Northern
(Springfield, OH)
(1st
year)
950*12 = $11,400 1,100+2,275 = $3,375 $8,025 51% 60%
Average rental yearly expenses (fixed+variable) 1st
year
properties
>1yr properties
$5,467 Average # of months
to pay off the rental
(for all the rentals)
$2,484
Average rental yearly net $5,730 34 months
Average monthly rental net revenue $556
average monthly rental rev $793.7
average total investment for rentals $13,500
average cost of the house for rentals $10,400
Our eventual goal is to shorten our
home-flipping process to 2-3 months
since we are planning to acquire more
flips in the future to generate more
fast cash for reinvesting it back in
rental business

4. 3/3/2015 3/10/15 145 W Southern
(Springfield,
OH, 1st
year)
1,100*12 = $13,200 770+5,500 = $6,270 $6,930 50% 73%
1/8/2013 2/22/14 79 E Norman
(Dayton, OH)
785*12 = $9,420 2,074+422 = $2,496 $6,924 49% 49%
12/17/14 2/4/15 332 W. Clark St
(Springfield,
OH, 1st
year)
(650*3)+(625*9)=
$7,575
1,012+5,745 = $6,757 $818 6% 42%
 Costs for existing property will drop once initial repair and renovation costs are
implemented; most above-mentioned properties have been owned for more than a year.
 Costs are calculated to be average of $2484 per year after the initial year; it will increase net
revenue and raise average ROI for 2016-2020 by about 9%.
In figure 2 it is clear that the main advantage of selling houses in Springfield is low total investment
costs. Low investment expenses lead to pretty high returns on investment (43% average for rentals in
2015).
Figure 3:
Bought Sold Flip Sales price (predicted) Total investment Net income (when sold
in future)
ROI (net income / total
investment)
5/28/14 10/29/14 Wales 3886 (SOLD) $76,600 $11,814 $25,186 213%
9/26/14 4/20/15
estimated
208 Corlington $47,000 $23,937 $21,063 88%
 208 Corlington Dr., Springfield OH has been remodeled and is for sale now.
Figure 3 describes a similar aspect of favorable market conditions for flips: low costs and
high resale prices bring ROI above 100%!
Figure 4:
Ratio Model 2016 (additional
property for 2016 added to currently
owned property in 2015)
Addition to total yearly net
income in 2016
Model A 4 flips : 1 rental $98,226
Model B 3 flips : 2 rentals $80,832
Model C 1 flip : 4 rentals $46,044

5.  For 2017-2020 see figure 6
Figure 4 shows that even though it may seem a lot riskier to acquire more flips than rentals
because of high costs, we are going to spend a lot on the flips in 2015, so that we can generate
enough cash to reinvest in renting part of our business that will be our main source of long-term
profit in next years.
Figure 5:
name of the county annual CF annual
gross yield
(%)
Clark county $9,682 13.96
Allen $8,450 12.66
Miami $10,052 10.06
Montgomery $10,392 12.75
Greene $9,968 9.56
Wood $9,157 8.33
Licking $10,870 10.37
Fairfield $10,591 8.9
Franklin $10,699 9.26
Stark $9,105 9.61
Portage $10,278 9.75
Summit $10,529 11.42
Cuyahoga $11,053 13.95
Delaware $9,582 5.88
Butler $11,043 10.23
Lorain $10,678 10.68
Medina $10,078 7.76
Lucas $9,852 13.4
Warren $10,500 7.79
Figure 5 shows annual cash flows
in Ohio for different counties. For
Comfort Living it is a bit lower
than Clark County figure shows,
but as our strategy follows, we are
planning to increase the number of
rentals in future, which will
contribute more to long-term
growth. At the same time, using
the advantage of low overall
investment costs, which are
granted by favorable market
conditions, we can have more
control over renting prices.
 Even though our CF is
lower than average of other
counties, our ROI is still
higher thanks to lower total
investment costs.
 Information about annual
CFs is obtained from
http://www.realtytrac.com/
news/real-estate-
investing/first-quarter-
2015-residential-rental-
market-report/

6. Lake $10,698 10.82
Trumbull $9,461 15.52
Clermont $10,945 9.68
Hamilton $11,200 11.24
AVERAGE $10,211 10.6
AVERAGE Rental CF
in Comfort Living and
average ROI
$9,490
43 (in
2015)
Figure 6 (future estimates):
Goal Total flips Total
currently
owned
rentals
New
rentals in
the next
year
Total net
income
(expenses
are already
incorporated)
Growth of
profit (%)
2015 $100,000 2 (Wales
sold in
2014)
7 1 $86,358
2016 $200,000 6 8 4 $184,584 113
2017 $300,000 9 12 5 $276,876 50
2018 $400,000 12 17 6 $374,898 35
2019 $500,000 15 23 7 $478,650 26
2020 $600,000 18 30 8 $588,132 23
Figure 6 represents our strategy for growing our business. Our goal is to grow each year by
about $100,000 in net income. Thus, through finding favorable ratios, we predicted our financial
estimates of running the business. We implemented a 5 year plan to see how our company is going to
grow within next 5 years. Our strategy is to add 3 flips average each year. Using the fast cash
generated from these flips, we will increase long-term wealth through efficient renting by adding 1
extra rental property to total number of added rentals from the previous years. Growth rate will be
decreasing each year so that we could keep our portfolio well organized and not overinvest and incur

7. losses due to lack of sufficient funds. Thanks to keeping the capacity of our portfolio reasonable,
Comfort Living is going to expand a lot in first years to reach a more stable growth of about 15-20%
after 2020. The figure 6 represents our conservative estimates that help us see how our company is
going to progress from a safe, risk-averse perspective. Note down that when calculating net profit,
expenses and investment costs were already incorporated.
Conclusion
Why invest in Comfort Living:
Comfort Living seems a nice opportunity for investors. Real Estate in Springfield Ohio is
part of a saturated market that offers immense amount of inventory. The biggest advantage of
Comfort Living is that it enables high sales prices and low investment costs through favorable market
conditions that are represented by high foreclosure level, low density of Springfield population, and a
high occupancy rate. These factors lead to higher returns on investment than other locations that do
not offer these favorable conditions to the same extent as Springfield. In addition to this, it is it is
easier to manage real estate portfolio than stock portfolio; stocks are generally a lot more sensitive to
economic changes than real estate. S&P 500 average return in 2014 was 13.8%. However, if we look
at the history of its returns, we see how volatile it was, which definitely underlines the risky aspect of
its unpredictability
 The information about the history of S&P 500 returns can be found here:
http://www.moneychimp.com/features/market_cagr.htm
http://fortune.com/2014/04/18/americans-have-fallen-in-love-with-real-estate-once-again/