This weeks featured property is an REO that sold on December 12, 2008.
This property demonstrates the value of having cash and the ability to close quickly.
REO: Escrow opened after 3 days 7 day escrow
Listed with: Ann Jochim/ Evergreen Realty
Shevy Akason and Associates has formed an exclusive partnership to work with buyers and pre-market REO's for the Jochim Team and West Coast REO's a division of Evergreen Realty
Numbers requested by Pili to demonstrate the effects of rent rate and vacancy.
First, I will use 1.5 months vacancy even though my avarage tenant stays for over 2.5 years and if you take 1.5/25 you get 5% which is what I use to calculate vacnacy.
Second, I will use $1500/month rent. According to the comps of leased listings the average lease is $1.57/square foot. $1.57* 989 square feet= $1552.73. Although current Orange County properties that make sense on a cash flow are not in A location I still do not recommend any of my clients to be slum lords. Therefor, I recommend having a clean nice property that will rent in the upper end of the comps. If you are a slum lord and have properties that are beat up you will attin the neighborhood within reason.
Original Cap rate= 9.5% Pili Original Cash on cash return= 30.9% Pili Original Initial investment= $24000 $35,970 Purchase price= $119,900 Rent= $1500- $1600/month $1600 was used for calculations for the purpose of this post
Potential Cash Flow= $500- $600+/month
Shevy Akason and Associates Principles for investments:
1) Cap rate of 8%+ using todays numbers, and not less than 5.5% using worst case scenarios 2) We use 5% vacancy as todays baseline, and 10% vacancy to calculate worst case scenario 3) We use todays rental numbers to calculate expected rent and account for rental deprecation of 12.5% to account for worst case scenario 4) We use an interest rate of 5% for those that are buying as a primary residence and 6.5% for investors 5) We account for lost income in downpayment of 2% 6) We Calculate 1%/year of the purchase price for maintenance reserves
Based upon todays numbers= 9.5% cap rate, cash on cash return of 30.9%
