Investment Opportunity with Blast REI
Offering:
68 Hoffman Ave, 72 Hoffman Ave, 295 McCarthy Ave, Albany, NY
These properties consist of three buildings in Albany, a location considered desirable. These buildings are adjacent, with ample shared parking, and outdoor space for tenants. They are fully rented at this point in time, all of which makes managing the properties more efficient. The layout of each unit is similar, Six 2-Bedroom/1-Bathroom units, with long term leases.
Attached are book reports that show all data about properties as listing on the Greater Albany MLS.
Condition and Expected Maintenance
All three buildings have perceivably new roofs, through our visual inspection (to be verified by current owner).
Since each unit is heated by electricity, there is little known maintenance required. The maximum we would need, from our walkthroughs, would be replacement of some worn siding at the foot of all the buildings, due to wear from 32 years.
Motivation to Sell
This is second owner to the buildings, and they have owned them for more than have of their 32 year age, about 20 years. Due to a divorce, the owner wants to get out of these properties to move on.
Building Layout
We have attached book reports with this package, but will describe the structures as they stand: Each building consists of two large 1,100 square foot units, each two larges bedrooms and one bathroom (one up and one down). Each unit has a large living room, an over-sized eat in kitchen, also in good shape (though not newly updated), with dishwasher and other appliances. Some have a washer/dryer. They all sit on a slab, without basement, minimizing potential surprises to investors. Condition is as you would expect from a building that is 32 years old, but appear to be well-maintained by current owners. There is a large shared back yard between all the buildings; and ample parking given the location and proximity to the highway. There is a common hallway in each building with stairs to second level.
Tenants: Each of the six units have long-term tenants, minimum of one year; leases renew at different points in the year. The condition of each unit is similar, and the level of cleanliness was surprising, superior to most of what we have seen in the Albany market.
Neighborhood
Nearby Amenities
These homes are very close to Delaware Ave, which is a main road with food, gas stations, barber shops, markets, convenience stores and many more necessities. They are also directly across the street from a large public park, Hoffman Park.
Confidential
Location and crime
These properties are in one of the safest neighborhoods in Albany. This is a clean neighborhood with minimal crime and a great deal of character. See Below:
Confidential
This map below represents a snapshot of Albany. There are a handful of colleges, state buildings that serve as the capitol of NYS, and other nice amenities like parks and other recreation. Albany tends to have a high working-class population, and with the proximity to I-787, this will be an ideal location for those median income state workers to have easy commutes.
See ‘Additional Supplements’ for some links to get more information about Albany, and surrounding areas as they continue to grow.
Confidential
Albany Landmarks
Confidential
Schools nearby
· Delaware Community School is less than a half mile away from the properties which is an Elementary school;
· Myers Middle school is about a mile and a half from these properties;
· Albany High School is 2 miles and change away from these properties.
Pricing
Financial Stability/Appreciation
According to Zillow, homes in Albany have maintained a stable trend in sales prices, with no major dips in the past year, outside of normal fluctuations in the seasonal real estate market. The 12209 zip code tended to trend downward since 2011, with an unusually high upward tick in the past few years.
The prices of homes in a similar location to our target properties have been selling within the past year as follows:
Address / Income (Monthly) / Sale Price / Income to Sale Price Ratio / Sale Date12 Friebel Rd / $ 3,400.00 / $ 288,400.00 / 1.18% / 10/12/2016
137 Whitehall Rd / $ 2,400.00 / $ 229,900.00 / 1.04% / 8/19/2016
5 Berncliffe Ave / $ 1,910.00 / $ 219,900.00 / 0.87% / 9/23/2016
71 Wellington Ave / $ 1,950.00 / $ 198,000.00 / 0.98% / 9/30/2016
25 Barclay St / $ 1,750.00 / $ 152,900.00 / 1.14% / 4/29/2016
Our Target Properties / $ 5,125.00 / $ 400,000.00 / 1.28%
Assuming rents stay at their current amounts, the existing scenario is in line with what is selling in similar locations. As we normalize rents to $6000 total gross for these buildings, we will find our Income to Sale Price Ratio increases to 1.5%.
Additional Albany stats:
· As of December 2016, average apartment rent within the city of Albany, NY is $1117. One bedroom apartments in Albany rent for $1002 a month on average and two bedroom apartment rents average $1186.
· The average apartment rent over the prior 6 months in Albany has increased by $24 (2.2%).
· The median home value in Albany, New York, is $160,600. Home appreciation is 6.06% over the last year [2016]. The median age of Albany, New York, real estate is 74 years. Renters make up 52.10% of the Albany, New York, population.
· Rental market vacancies are at about 3.78%.
Rental Price Comparables
You will also find attached several rental comparables, showing income for similar 2 bedroom units at or above $975 per month in a similar location, all South of Albany. These three comps paint a compelling picture for an increase in rent rolls for all the units. If we do any upgrades to kitchens, we will find these rents to exceed $1,000, but would not make those decisions without approval (See ‘Decision Making’).
Financials
68 Hoffman Ave, 72 Hoffman Ave, 295 McCarthy Ave, Albany, NYPurchase Price / $400,000.00
Closing Costs / $15,000.00
Repair Reserves / $5,000.00
Inspections / $1,500
Appraisal: / $1,000
Total Cash Needed / $420,000.00
Gross Rents (Monthly) / $5,125.00
Gross Rents (Yearly)(EGI) / $61,500.00
Fixed Expenses and Reserves
Taxes (Monthly) / $1,167.00
Taxes (Yearly) / $14,004.00
Insurance (Monthly) / $375.00
Insurance (Yearly) / $4,500.00
Total Fixed Expenses (Yearly) / $18,504.00
Operating Expenses and Reserves
Vacancy Reserve (Monthly) / $512.50
Maintenance Reserve (Monthly) / $416.67
Advertising, Pest Control Reserve (Monthly) / $50.00
Total Operating Expenses (Yearly) / $11,750.00
NOI / $31,246.00
Monthly Expenses / $2,521.17
Annual Cash Flow / $31,246.00
Cap Rate / 7.81%
Cash on Cash Return / 7.44%
Rent Rolls
Building and Unit: / Current Rent:68 Hoffman Ave, Unit 1 / $825
68 Hoffman Ave, Unit 2 / $825
72 Hoffman Ave, Unit 1 / $850
72 Hoffman Ave, Unit 2 / $850
295 McCarthy Ave, Unit 1 / $875
295 McCarthy Ave, Unit 2 / $900
All Units / Total: $5,125
Sample Return Schedule
If we have 4 investors, at 25% equity a piece, here is a sample of what expected cash on cash return will look like:
Investment / Stake / Yearly Cash Flow / Monthly Cash Flow / Starting Cash on Cash ReturnInvestor 1 / $105,000 / 25% / 6639.775 / $553.31 / 6.32%
Investor 2 / $105,000 / 25% / 6639.775 / $553.31 / 6.32%
Investor 3 / $105,000 / 25% / 6639.775 / $553.31 / 6.32%
Investor 4 / $105,000 / 25% / 6639.775 / $553.31 / 6.32%
TOTALS / $420,000.00 / $31,246.00 / $2,603.83
Management and Acquisition Fee / Non Equity: / 15% / $4,686.90 / $390.58
Fixed expenses:
Fixed Expenses: / Per Unit / For all 3Taxes: / $4,666 per year / $14,000 per year
Insurance: / Est. $1,500 per year / Est. $4,500 per year
Maintenance/Property Management
All Maintenance costs (at business year end, December 31) will be split proportionally among investors according to your current equity stake. There will be $5,000 put into reserves from our initial round of financing (as a Maintenance Buffer), and then a portion of our gross income (as seen in the Pro Forma) each month. If there are sufficient funds in reserves to cover the costs of maintenance, there will be no need to debit shareholders; if an unforeseen circumstance arises, we will ask investors to contribute, if necessary (though with the current, conservative pro forma, we don’t find this likely). If this money, in addition to the reserves is depleted, and major repairs are necessary, a special assessment will be sent to owner proportionate to your equity stake (Management and Acquisition fee notwithstanding). Maintenance will then be prioritized before payouts to investors each quarter. At the end of each business year, we would pay a ‘bonus’ if there is excess cash in the reserves (with $3,000 in those reserves at all times).
The properties will be managed by BlastREI LLC through a network of professionals on the ground in Albany. Our years of experience in this market has led to formation of relationships with contractors, handymen, and other professionals to assist us. Billed at $25-$50 per hour, we will have an on-call professional deal with emergencies, and simple maintenance, with more expensive necessities approved by BlastREI LLC. This allows us to manage from a far, but still keep an eye on our investments as we continue to visit the area frequently. We have done the same thing with out other units, and found that property management companies are expensive for the time being. If we should decide that hiring a management company is worthwhile, the cost of their services would be allocated from a combination of our 15% fee and the reserve money (for repairs). The fee we are charging is far below management company fees at the moment, typically 7-10% of gross rent, not including a slew of setup fees (and other fees) sometimes undisclosed.
Vacancy
We have factored a 10% vacancy rate, well below the 3.78% cited above in the city of Albany. This money will be reserved each month until the end of the business year (December 31), in which case we will pay any excess funds in these reserves back to shareholders without depleting the fund past $2000 (Total of $5000 in these Reserves at all times). The money in this reserve is intended as a backup to the Maintenance Reserve fund, in case of any unexpected mishaps during the ownership.
Closing Costs
While we work with our attorneys in upstate NY to get firm numbers on closing costs, it’s important to note that this $15,000 figure is potentially high for just three simultaneous closings on properties that are under one transaction. We have been conservative here with expected $1,500 per LLC ($4,500), and setting up this operating agreement, which should cost around $1,000 to be fully executed.
Our deal structure
As an investor, you will get equity based on you cash in.
Minimum investment = $25,000 per individual
Payouts will be made with net cash every quarter as follows:
15% to BlastREI LLC. as management fee and acquisition fee, for all obligations included in managing and purchasing the properties. This includes setting up the appropriate entities, managing shareholder payments, tax filing and preparing for the properties, and much more.
Other investors are then paid as a proportion of their cash in, so if you have a 25% equity stake (or you provided 25% of the Total Cash In), your quarterly cash would be:
(Net Monthly Cash Flow * 3) * .25 = Quarterly Net Payout.
We ask whomever invests with us be silent partners unless otherwise specified, you will be receiving a quarterly check as you would if you were investing in the stock-market.
Decision Making
All maintenance requirements will be conducted at the discretion of Joe and Chris, specifically ‘required’ maintenance.
Any upgrades that can be categorized as ‘improvements’ to the dwelling, such as upgrading kitchen cabinets, vanities, etc when not necessary due to failure of the existing implements, will be voted for with 51% or more in agreement with contractor estimates, scope of work, and expected increases in returns conveyed to each investor. These funds would be taken from ‘Maintenance Reserves’ unless they exceed that amount, in which case the ‘Vacancy Reserves’ would be used, and finally, the section on ‘Maintenance/Property Management’ would take precedent. Our goal with any non-required maintenance would be to increase Rent Rolls and the value of the property.
Cash Out
Cashing out would be allowed after 5 years with no penalty, before then, we would Cash Out as follows:
Year 1: (Your Cash In) – 50% (of initial investment, appreciation not considered)
Years 2 – 5: (Your Cash In) – 25% (of initial investment, appreciation not considered)
At the end of 5 years, we can cash out the property, with investors getting all stake in the property, and Management taking nothing. In other words, if you own 25% of the property, you will get 25% of the net proceeds, if property is sold or if you want your money to be withdrawn. Otherwise, you can continue to collect returns until you want to divest of your shares or if the property is sold, whichever comes first.
If the property is sold, or refinanced, then the bank appraisal will take priority. If a single shareholder would like to divest after 5 years (without sale or appraisal), they can choose to pay for an appraisal by a qualified professional, else they will take the opinion of value of a broker and/or Joe/Chris (backed with data on the market in Albany). At any point in the case of a Cash Out, other owners will get first right of refusal for those shares, else some agreement will have to be made, resulting in possible sale of the property anyway.
What is required now
We will have a contract among all parties recognizing all investors and their contributions. Depending on your equity stake, we will ask for money for Inspection, Appraisal, and 1% good faith deposit to be split according to your stake.
So, total cash needed today at expected purchase price is $4000 + $1000 + $1500, with those costs folded into the property if they are over our estimates.