Revere Street Essay

Angus Cartwright III, an investment advisor, was asked to provide investment advisory services for two clients, John DeRight and Judy DeRight. They both wanted to purchase a property that (1) is large enough to attract the interest of a professional real estate management company and (2) has a minimum leveraged return on their investments of 12% after

3) the husband did not own the residence individually or as a tenant in common with his wife, in which case there may have been a legitimate reason to transfer the property to tenancy by the entirety other than to avoid a judgment debt.

After analysis of Mr. Alexander’s proposal, it is obvious why he should take advantage of a real estate investment opportunity. The experience he would gain coupled with the added income would establish a solid foundation for making more investments in the future. To this end, however, I find Alexander’s plan for the Revere Street property falls short. A major deficiency is that his projections are almost entirely predicated on estimates and assumptions that are neither conservative nor reliable. In a similar vein, Alexander’s “DIY” approach is not only exemplar of naiveté, but also suggestive of many implications that were overlooked in his proposal. And, even more discouraging, a best-case scenario analysis reveals that even without

Mr. Alexander is a gentleman that is looking to build his investment portfolio through residential real estate. He is looking at investing in a 4-plex in a historical district located within Boston, Massachusetts. The building is located on Revere Street and has a listing price of $350,000. Mr. Alexander is evaluating the possible commitment to understand what he stands to gain from the annual cash flows while at the same time understanding the risks involved. The subject property is located within a historical district and is not yet capable of housing tenants. Property will require significant improvements prior to inhabitation. Client

The property, according to Alexander, was aesthetically desirable and had profit potential; additionally the asking price of $350,000 was within his price range. Some renovation on the property was needed and the cost approximates $165,000 according to a contractor. After preparing an income and expense statement, Alexander projected a cash flow before financing of $61,510, without any allowance for the work he would do himself. He also planned to live in the top floor apartment with his wife “rent free”, while making money by managing and renting. With time of the essence, he had to act fast and take the property off the market before a potential investor got ahead of him.

He already would have a tenant for 100,000 SF of space and the additional 75,000 he would find over the next couple of years. On the other hand if Bailey wants to take on more risk in terms of converting the condo’s he would 150 in his inventory and they could become a problem to sell. It is always easier to rent something than sell a large unit. If Bailey were to convert the building into condos it would cost him $31,800,000 to do the conversion. Then if he charged around $575 (lower than building across the street) for the low floors and $625 for the high floors, this total revenue would be 104,375,000, which after condo conversion fees would be $7,2,575,000 minus other expenses. However, we must not that before he can start selling these condos, it would be 2 years from the date where he bought the building. Therefore, he would lose out on Cash flows year 1 and 2 as seen in the excel sheet from renting the building. In the long run, however, if all of these apartments were the sell, he would make much more. Furthermore, he could also rent whatever he wouldn’t be able to sell. The building is at least worth 15,000,000, though the bids will be much higher. The building was in an attractive location in the heart of downtown a few blocks from the financial district.

Laflin’s setup suffers from some overly optimistic assumptions. His revised set up assumes a base rent of

Option 2 (Proceed with Mid-Rise Apartment Complex, Selling in Year 10): While replacing the current structure with a more appealing mid-rise apartment complex would increase the market value of the property, it would also require financing and additional investments. Thus far, Sexton has run into several problems, beginning with the planning commission, and now higher cost estimates, financing and timing issues. Even if Sexton were to obtain financing and somehow meet the January 2005 target date, his original estimates of rental income and cash flow analysis are still not guaranteed. Exhibit 2 provides a net present value range between 103,000 and $214,000 for proceeding with the mid-rise apartment complex and selling in year 10 based on a range of cap rates.

him. The narrator struggles to verbally describe the building so Robert has him draw it

spent enormous amounts of money on this mansion that he would barit ely even use instead

When we look at 75% occupancy, the rate of return (net earnings divided by amount invested) is $298,000/$3,525,000 = 8.4%. . This return should be regarded as low; as the

This report provides an analysis and evaluation of the current and prospective profitability of the Shady Trails property. Methods of analysis include trend, horizontal and vertical analysis as well as calculations such as Return on Assets, Return on Equity, Loan-to-Value ratio and the Gross Rent Multiplier. All calculations are found in the appendices.

If you invest in the project after five years you will get $ 463,188.77 which is $ 13,188.77 more.

owning his own place would allow him to keep Lennie from getting into trouble. But more

After reviewing exhibit 7.4.2, list what you regard as the major problems with the Darby appraisal system. Make specific recommendations about changing the system.