Presenting Real Estate Investment Numbers to J.V. Partners

What my slide deck looks like (with a little bit of explanation)

ChrisDavies.ca

Purchase $190,000.00

Down Payment $19,000Legal Fees $ 1,000Reserve Fund $ 4,500Title Insurance $ 1,000Insurance $ 1,000Assessment $ 3,300

Cash to Close $29,800

Purchase $190,000.00

Down Payment $19,000Legal Fees $ 1,000Reserve Fund $ 4,500Title Insurance $ 1,000Insurance $ 1,000Assessment $ 3,300

Cash to Close $29,800Plus

Renovations $25,000(that’s $54,800 in total)

Purchase $190,000.00

Down Payment $19,000Legal Fees $ 1,000Reserve Fund $ 4,500Title Insurance $ 1,000Insurance $ 1,000Assessment $ 3,300

Cash to Close $29,800Plus

Renovations $25,000(that’s $54,800 in total)

Purchase $190,000.00

Down Payment $19,000Legal Fees $ 1,000Reserve Fund $ 4,500Title Insurance $ 1,000Insurance $ 1,000Assessment $ 3,300

Cash to Close $29,800Plus

Renovations $25,000(that’s $54,800 in total)

Purchase $190,000.00Renovations $25,000

Appraised Value After Renovations:

$250,000

A Warning About These Numbers:Renovation Costs are estimates. In reality (Aug/08), the actual cost was $25,323.34. Renovation costs can change rapidly, and $25,000 is an estimate only.

A Warning About These Numbers:The analysis beyond this point is based on a few rules, and is an projection and estimate only. All calculations are simple, rather than compound.

NEVER use these as anything but an estimation, a best guess, or a projection.

Do your own homework!

Cash Flow AnalysisIncome

Rent $1,500.00

ExpensesProperty Mgmt (8%) $ 120.00 Condo Fees $ 255.00 Property Taxes $ 88.00 Vacancy (4%) $ 60.00 Repairs & Maint (4%) $ 60.00 Mortgage (4.5%, I Only) $ 671.71

Total Expense $1,254.71

Net (Monthly): $ 245.29

Total Positive Cash Flow

$2,943.49

$6,587.18

$10,876.07

$15,842.44

$21,520.15

Year 1 Year 2 Year 3 Year 4 Year 5

Annual and Total Positive Cash Flow

Annual TotalYear 1 $2,943.49 $2,943.49

Year 2 $3,643.69 $6,587.18

Year 3 $4,288.90 $10,876.07

Year 4 $4,966.37 $15,842.44

Year 5 $5,677.71 $21,520.15

Appreciation Model: Estimated 5% per Year for Five Years

Value at Purchase $250,000.00

Estimated Value 2013 $312,500.00Mortgage Outstanding $179,122.50

Appreciation $133,377.50Cash Flow $21,520.15

Estimated Gross Profit $154,897.65

Gross Profit $154,897.65

Investment Returned $54,800.00

Net Profit $100,097.65

Split 50/50 $50,048.83

Investment $54,800.00

Estimated Return $50,048.83

Return on Investment 91% (Five Years)18% Per Year

Investment $54,800.00

Cost of Borrowing $13,700$54,800 for five years at 5%.

Investment $54,800.00

So instead of costing you $54,800 in cash, it can actually cost you $13,700.

Investment $54,800$13,700

Investment $54,800$13,700

That’s like getting a real estate investment on sale for 75% off!

You could buy 4 properties for the same amount of cash.

Assuming you can borrow $250,000 (or so) for the down payments, closing costs, and renovations.

And find 4 properties just like this one.

Investment $54,800$13,700

But the real point is:

Investment $54,800$13,700

Estimated Return $50,048.83

Return on Investment 365% (Five Years)73% (Per Year)

Investment $13,700

Estimated Return $50,048.83

Return on Investment 365% (Five Years)73% Per Year

You find me a stock or mutual fund that will do 73% a year on the conservative side.

Investment $13,700

Estimated Return $50,048.83

Return on Investment 365% (Five Years)73% Per Year

This projection uses 5% per year as an estimated increase in property values.

The average in Edmonton since 1962 is 7.91% per year.

Imagine what one year with a 10% increase would do….

Basic Rules of This Presentation:

• This presentation, as well as the calculations, estimations and projections contained within it, have been created for the purpose of communicating the way I present information, and not the information itself.

• Projections are calculated using simple math, and not compounded.

• Every reasonable effort has been made to make accurate calculations. I am not immune to making mistakes when playing with rather large spreadsheets. The numbers and the estimated rates of change are not to be taken as a guarantee or promise of return. All real estate investments are speculative and you MUST do you own due diligence.

• This is not a solicitation. This presentation is only for information purposes, intended to illustrate how I communicate.

• Please see my Legal Disclaimer.

Credits:

From Stock Exchange (click to link)

Taken by me, circa August 2005.

For more real estate investor resources, check out my Real Estate and Property Management Blog