metro detroit real estate investment

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  • Opportunity Review -Detroit Market

    Investment Strategy

  • www.cbwm.com/keago

    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 / Build Value (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.

    Find Vacant 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

    LeaseOffer 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

    20000

    40000

    60000

    80000

    100000

    120000

    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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    0

    50000

    100000

    150000

    200000

    250000

    300000

    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