731 A Somerville Avenue Investment Offering
PROPERTY - 731 A SOMERVILLE AVENUE SOMERVILLE, MA 02143 - Purchase price is $146,900. 1st floor, 900 s.f. unit with 2+
bedrooms, 1 bathroom, in a four family house, converted to condominiums. The property is a 12 minute walk to the very desirable Porter Square on the west side of Somerville very close to the Cambridge line.
Many young professionals and families live in this area because of the neighborhood feel, abundance of shops and restaurants and access to the Red line T subway. The exterior is in good condition. There is a nice shared back yard. There are two bedrooms, living room, kitchen and full bathroom upstairs and another open room, utilities room and storage area downstairs. The entire interior needs to be renovated with new hardwood floors, new appliances, cabinets, counter tops, sinks, shower, tile, lighting, plumbing and electrical upgrades, laundry machines, doors, fixtures and new sheet rock and paint on the walls. One upstairs bedroom will be enlarged; the downstairs room will be carpeted and wall studs will be built and covered with sheet rock. The heating
system and windows are in good working condition. See photos below. The cost of renovations, permits and purchase closing costs are estimated at $53,000. The other units are currently owned by the same owner who defaulted on this unit; two other units are already in foreclosure.
SALES AND RENTAL VALUES - S.Zelman has toured the unit with Resnick, our investment partner who is very familiar with this area as he has owned over 50 units throughout Somerville and Cambridge. Coldwell Banker, Century 21, Porter Square Realty and Prime Realty, four local brokerages, all gave a conservative base price for this unit at $300,000 after renovations are completed. The average more accurate price they estimated was $325,000. Some condos with similar specs have sold closer to $400,000 in that area. These values do not include any adjustment for inflation, which could push the sales value towards $400,000+ by 2013. The estimated rent is $1800 right now, and $2000 for a September lease cycle. Many rental agents have waiting lists for units near Porter Square.
STRATEGY - Resnick will pay a deposit of $25,000 and sign a Purchase & Sale Agreement. A new entity (a realty trust) is created between Resnick and Genesis Equities to partner in the purchase of the property. Genesis Equities pays $121,900 at closing - $47,000 transferred from the existing equity line and $74,900 from the company account. Closing is scheduled for December 20th. Resnick will use the remaining $53,000 from the existing equity line for renovations and closing costs. That is a total of $174,900 contributed to the project from Genesis Equities. Resnick will refinance $180,000 from the property after renovations are complete in February and Genesis Equities will receive $160,000 back in 60-90 days after purchasing the property. Those funds can be used immediately on our next investment. Resnick will receive $14,000 from the refi and the remaining $6,000 will pay for closing costs of the refi. All financing will be done through Resnick's portfolio. The bank that completed the refi on Spring Street stated that they can close the next refi in 4 weeks at an amazing rate of 3.75% for an investor loan.
Lease the unit March 1 after the renovations are complete until September 2012 for $1800 per month. Lease the unit starting September 2012 until August 2013 for $2000 per month. Total net rental income for the 20 months holding the property is $4,014.15 for a total ROI of 13.10% or 7.74% annualized (see rental income analysis below). If we choose not to sell the unit and continue to rent it at $2000 we would profit $6,420 annually for a future ROI of 43.09% based on our $14,900 of total cash invested. Rent minus expenses will be dispersed to Genesis Equities every two months.
During the next year, Resnick will attempt to purchase the other two units in foreclosure and rectify the condominium association. The bank will fund the association account after the other units are sold through foreclosure. $5,000 will be allocated to the potential costs for any legal process and upgrades to the common areas if needed.
The property will be listed for sale in Spring 2013 at market value, approximately $339,000 list price. A $325,000 sale price makes the sales profit $50,655 after the refinancing (see sales income analysis below). Resnick will pay Genesis Equities a preferred return of 10% on all proceeds for contributing the majority of the initial down payment. The profit share after the preferred return is 50/50. Genesis Equities would profit $54,669.45, an ROI of 178.38% on our 20 month investment after the refinance is complete or an ROI of 105.34% annualized. (see profit distribution & ROI below). If the contribution money of $174,900 remains in the property and no refinancing is completed, Genesis Equities would own 87.49% of the property instead of 50% and the preferred return would be eliminated. The ROI would be 56.83% and net profits from sales and rental would rise to $99,399. Refinancing and recapturing most of the contribution funds would enhance our rate of return and allow us to reinvest on a new project as soon as this March.
RECOMMENDATION - The profit margin and ROI is spectacular. The property is in need of major rehab and in a great area with high demand. The long term deposit is such a low amount after refinancing - that is the key to such a high ROI and it allows the opportunity to reinvest most of the initial contribution in 3 months. Potential partners don't come much more experienced, successful and reputable than Resnick. He has done many projects similar to or more complicated than this one. S.Zelman has known him for 15 years. Beantown Company does an excellent job managing rental units. Our experience on the 16 Spring Street project and 15 Waldo Mortgage with Beantown Company has gone better than anticipated. This investment is solid, funds are already in place and we will work to close on time, while still holding enough funds to invest in another project in March or April.
MAP - http://maps.google.com/maps?q=731a+somerville+ave&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&ei=wvniTvWsOqvYiAKsx7zQBg&sa=X&oi=mode_link&ct=mode&cd=3&ved=0CAoQ_AUoAg
*All projections of revenues, expenses, profits, rents, distributions, refinancing scenarios, sales values and ROI are merely estimations based on current real market data and property information. Genesis Equities LLC and Steven Zelman do no guarantee performance in regards to any information contained on this website or in any related documents or emails.
SALES AND RENTAL VALUES - S.Zelman has toured the unit with Resnick, our investment partner who is very familiar with this area as he has owned over 50 units throughout Somerville and Cambridge. Coldwell Banker, Century 21, Porter Square Realty and Prime Realty, four local brokerages, all gave a conservative base price for this unit at $300,000 after renovations are completed. The average more accurate price they estimated was $325,000. Some condos with similar specs have sold closer to $400,000 in that area. These values do not include any adjustment for inflation, which could push the sales value towards $400,000+ by 2013. The estimated rent is $1800 right now, and $2000 for a September lease cycle. Many rental agents have waiting lists for units near Porter Square.
STRATEGY - Resnick will pay a deposit of $25,000 and sign a Purchase & Sale Agreement. A new entity (a realty trust) is created between Resnick and Genesis Equities to partner in the purchase of the property. Genesis Equities pays $121,900 at closing - $47,000 transferred from the existing equity line and $74,900 from the company account. Closing is scheduled for December 20th. Resnick will use the remaining $53,000 from the existing equity line for renovations and closing costs. That is a total of $174,900 contributed to the project from Genesis Equities. Resnick will refinance $180,000 from the property after renovations are complete in February and Genesis Equities will receive $160,000 back in 60-90 days after purchasing the property. Those funds can be used immediately on our next investment. Resnick will receive $14,000 from the refi and the remaining $6,000 will pay for closing costs of the refi. All financing will be done through Resnick's portfolio. The bank that completed the refi on Spring Street stated that they can close the next refi in 4 weeks at an amazing rate of 3.75% for an investor loan.
Lease the unit March 1 after the renovations are complete until September 2012 for $1800 per month. Lease the unit starting September 2012 until August 2013 for $2000 per month. Total net rental income for the 20 months holding the property is $4,014.15 for a total ROI of 13.10% or 7.74% annualized (see rental income analysis below). If we choose not to sell the unit and continue to rent it at $2000 we would profit $6,420 annually for a future ROI of 43.09% based on our $14,900 of total cash invested. Rent minus expenses will be dispersed to Genesis Equities every two months.
During the next year, Resnick will attempt to purchase the other two units in foreclosure and rectify the condominium association. The bank will fund the association account after the other units are sold through foreclosure. $5,000 will be allocated to the potential costs for any legal process and upgrades to the common areas if needed.
The property will be listed for sale in Spring 2013 at market value, approximately $339,000 list price. A $325,000 sale price makes the sales profit $50,655 after the refinancing (see sales income analysis below). Resnick will pay Genesis Equities a preferred return of 10% on all proceeds for contributing the majority of the initial down payment. The profit share after the preferred return is 50/50. Genesis Equities would profit $54,669.45, an ROI of 178.38% on our 20 month investment after the refinance is complete or an ROI of 105.34% annualized. (see profit distribution & ROI below). If the contribution money of $174,900 remains in the property and no refinancing is completed, Genesis Equities would own 87.49% of the property instead of 50% and the preferred return would be eliminated. The ROI would be 56.83% and net profits from sales and rental would rise to $99,399. Refinancing and recapturing most of the contribution funds would enhance our rate of return and allow us to reinvest on a new project as soon as this March.
RECOMMENDATION - The profit margin and ROI is spectacular. The property is in need of major rehab and in a great area with high demand. The long term deposit is such a low amount after refinancing - that is the key to such a high ROI and it allows the opportunity to reinvest most of the initial contribution in 3 months. Potential partners don't come much more experienced, successful and reputable than Resnick. He has done many projects similar to or more complicated than this one. S.Zelman has known him for 15 years. Beantown Company does an excellent job managing rental units. Our experience on the 16 Spring Street project and 15 Waldo Mortgage with Beantown Company has gone better than anticipated. This investment is solid, funds are already in place and we will work to close on time, while still holding enough funds to invest in another project in March or April.
MAP - http://maps.google.com/maps?q=731a+somerville+ave&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&ei=wvniTvWsOqvYiAKsx7zQBg&sa=X&oi=mode_link&ct=mode&cd=3&ved=0CAoQ_AUoAg
*All projections of revenues, expenses, profits, rents, distributions, refinancing scenarios, sales values and ROI are merely estimations based on current real market data and property information. Genesis Equities LLC and Steven Zelman do no guarantee performance in regards to any information contained on this website or in any related documents or emails.
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Rental Income Analysis
Monthly Expenses Mortgage $850.00 Condo Fee $250.00 Taxes $180.00 Management $55.00 Maintenance $50.00 Realtor Fee $80.00 __________ Total Monthly Expenses $1,465.00 Monthly Rent 3/1/11 - 8/31/11 = $1800 Monthly Rent 9/1/11 - 8/31/12 = $2000 Partial Dec & Full Jan/Feb expenses = $1131 First 6 Months Rental Income = $1800 - $1,465 = 335 x 6 months March-Aug = $2010 First 8.32 Months Net Income = $879 Next 12 Months Rental Income = $2000 - $1,465 = $535 x 12 months Sept-Aug= $6,420 Net Rental Income for 20.32 Months = $7,299 10% Preferred Return = $729.90 50% Profit Distribution = $7,299 - $729.90 X .50 = $3,284.55 Net Rental Income Distribution for 20.32 Months = $729.90 + $3,284.55 = $4,014.45 Averaged 20.32 Month Monthly Deposit = (2 months at $174,900 = $349,800) + (18.32 months at $14,900 = $272,968) / 20.32 = $30,648.03 20.32 Month Rental Income ROI = $4,014.45/$30,648.03 = 13.10% Annualized Rental Income ROI = 7.74% Future Rental Income ROI = $6,420 Annual Net Rental Income / $14,900 Total Cash Invested = 43.09% |
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Click on any of the photos to view a larger image:
Exterior frontage from Somerville Ave
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Shared back yard
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Kitchen
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Bathroom
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Living Room
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Stairway to lower level
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Bedroom #1
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Bedroom #2
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Lower level with full-size windows
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Gas heater with forced hot water and hot water tank in utilities room
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Construction Photos 2/29/12
Click on any of the photos to view a larger image:
Bathroom Shower Area
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Bathroom Toilet and Sink Area
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Bedroom
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New Closet
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Kitchen
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Construction Photos 4/17/12
Mostly new sheet rock on the walls, new plumbing and electric lines have been installed. Click on any of the photos to view a larger image:
Living Room
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Bedroom #1
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Kitchen
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New closet complete in Bedroom #2
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Bathroom
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Construction Photos 6/6/12
Renovations nearly complete except for some plumbing fixtures and the granite counter top. Click on any of the photos to view a larger image:
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Photos 5/29/13
Completed renovations, tenants moving out. Click on any image to see a larger one:
Kitchen
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Living Room
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Bedroom #1
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Bedroom #2
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Stairwell to Lower Level
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Lower Level
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Lower Level Laundry
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Lower Level Utilities Room
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Bedroom #2
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Bedroom #2
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Bathroom
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Back Yard Clutter
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Front Entrance - Paint Peeling on the Siding
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Front Entrance - Rusted Mailboxes
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Front Entrance - Paint Peeling on Banister, Untrimmed Hedges
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Side Walkway Clutter
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Back Yard Clutter
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