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DiscountedInvestmentOpportunity**SELLERFINANCING**

6-UnitMixed-UseBuilding(4Apartments/2Retail)

Street View

Offeredby:Signature Landmark Properties, LLC (Offeror) (346) 212-0291 [email protected]

Verification of Down Payment (VOD) is required with all offers. 1

TableofContents Contents PageTable of Contents ............................................................................................................................ 1Investment Opportunity .................................................................................................................. 2Property Financial Analysis ............................................................................................................ 3Market Rent & Area Report ............................................................................................................ 4Confidentiality ................................................................................................................................ 5Disclaimer ....................................................................................................................................... 5Contact Information ........................................................................................................................ 5Condition Report ............................................................................................................................. 6 How to Profit with Small Apartments (You may want to Read Me first)……….…….………..8

Satellite View


InvestmentOpportunity Purchase Price: $135,000 Price per door: $22,500 Property Class: C Area Class: C Property Type: _X__ Stable ____ Fixer Upper ___ Rehab / Turnaround Financing: _X_ Seller Financing ___ Cash ___ Bank ___ Other Property Management: Investment Benefits

§ Pro forma cap rate 12.4% § Cash on cash return 16.9% § 5 year annual ROI 139.8% per year § Stable Property § No repairs needed § Great unit mix § Priced to MOVE § Fully occupied § Perfect small apartment starter § Priced below market § Room for rent increases § Even more possible value plays!

Number of Units: 6 (4 apartments; 2 retail) Current Occupancy: 100% Market Cap Rate: 6.75% Building Square Footage: 5,680 sq. feet Land Acreage: .09 acres Year Built: 1924 Opportunity: Excellent opportunity for an investor to get on board with a stable property. Status: Under contract by Offeror. New Buyer will be assigned the contract to close. Price includes the assignment fee to Offeror.

Property management matching assistance available for qualified Buyers.


PropertyFinancialAnalysis

Unless otherwise noted, Expenses include all expenses such as taxes, insurances, repairs and maintenance, capital reserves and the property management fee.

The formulas behind the math are noted above, next to the calculated result (ex: {E/B}). For a complete explanation, see “How to Profit with Small Apartments” on p. 8.


MarketRent&AreaReport Below you will find third party rent comps and market area analysis:

Market Rent Comps (Source: Rentometer.com)

Area Crime Map (Source: Trulia.com)

(Red = ___; Yellow = ; Green = )


Confidentiality It is acknowledged by reader that information furnished in this Executive Summary is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious damage; therefore, reader agrees not to disclose it without the express written permission of Offeror.

DisclaimerOfferor has prepared this Executive Summary, which contains brief, selected information pertaining to the business and affairs of the property. The information contained herein does not purport to be all inclusive nor does it purport to contain all of the information representative of the property. Offeror nor any of its respective partners, officers, employees or agents makes any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained herein or otherwise expressed and conveyed and no legal liability is assumed or shall be implied with respect hereto. Such information and statements have in many circumstances been obtained from outside sources, have not been tested or verified and may be subject to errors or omissions. Projections, especially, are based on various assumptions and subjective determinations as to which no guaranty or assurance is given. Potential investors are recommended and urged to perform their own examination and investigation and not to rely on the information contained within this document or other materials otherwise provided.

ContactInformation Please contact me at the phone number or email address listed below if you are an interested party, or if you require further information. Signature Landmark Properties, LLC (346) 212-0291 [email protected]


ConditionReportp.1This is a drive-by condition report by a third party:


ConditionReportp.2


HowtoProfitwithSmallApartmentsbyLanceEdwardsp.1

How Do I Know if It’s a Good Deal? When buying small apartments, it is all about the “math”, the ROI. Here in this Excutive Summary, the math for this property is spelled out on page 3. This section explains the math – true for any analysis of commercial income-producing real estate. There are three performance indicators:

1. Cap Rate 2. Cash on Cash Return. (CCR) 3. Five Year Annual ROI

1) Cap Rate – Stands for capitalization rate and measures the return on capital if you were

paying all cash for a property:

Cap Rate (%/yr) = NOI / (Price + Rehab) NOI ($/yr) = Net Operating Income = Revenue – Expenses

Revenue is the collection of rent, taking into account vacancy. Expenses includes all costs to operate the building: taxes, insurance, maintenance, utilities, 3rd party management fee, everything - excluding mortgage payments.

Example: A 12 unit property has Revenue = $60,000 / yr and Expenses = $30,000 / yr. It’s price is $320,000 with $13,000 of deferred maintenance (rehab). What’s the cap rate?

NOI ($/yr) = $60,000 - $30,000 = $30,000/yr Cap Rate (%/yr) = $30,000 / ($320,000 + $13,000) = 9.0%/yr

We show market cap rate on page 2. 2) Cash on Cash Return (CCR) – When you use financing to purchase real estate, you achieve

financial leverage by earning a higher return on the amount of cash in the deal. This is CCR:

Cash-on-Cash Return (%/yr) = Cash Flow / Cash in the Deal

Cash Flow ($/yr) = NOI – Mortgage Payments Cash in the Deal ($) = Down Payment + Rehab Costs + Closing Costs

Buying Criterion For 5+ unit buildings, you want to purchase at a

cap rate at least equal to the market cap rate.


HowtoProfitwithSmallApartmentsbyLanceEdwardsp.2 Example: The above property may be purchased 20% down ($64,000) with $13,000 of deferred maintenance and $3000 closing costs. And the mortgage payments (debt service) are $18,000 per year. What’s the cash flow and the cash-on-cash return?

Cash Flow ($/yr) = $30,000 - $18,000 = $12,000/yr Cash in Deal = $64,000 + $13,000 + $3000 = $80,000 Cash-on-Cash Return (%/yr) = $12,000 / $80,000 = 15%/yr

Due to financial leverage, cash on cash return will always be greater than cap rate when financing. This includes when purchasing with financing or purchasing with 100% cash (to secure the lowest price) and then refinancing to extract back the cash. 3) Five-Year Annual ROI – CCR measures the return from cash flow. Five-year annual ROI

measures the return from both cash flow and equity gains, over a period of five years. It is the total return on investment of a property:

Five Year ROI (%/yr) = Five-Year Total Return / Cash in Deal / 5 years

5-Year Total Return ($) = (5 Yr Cash Flow) + (Equity @ Closing) + (Mtgage Paydown) 5-Year Cash Flow ($) = Cash Flow x 5 yrs Equity at Closing ($) = Market Value – Purchase Price Mortgage Paydown ($) = Mtgage Balance @ Closing – Mtgage Balance after 5 years

Equity at Closing means FREE equity gained by purchasing at a price less than market value.

How is Market Value Determined? Market Value - For small apartments, the method of determining market value is straight forward, only dependent on whether it’s 2-4 units (residential) or 5+ units (commercial):

Market Value = Comparable Price “comps” (2-4 units) Market Value = NOI / Market Cap Rate (5+ units)

Buying Criterion The Cash-on-Cash Return should be at least

10% for a solid cash flowing property.

Buying Criterion The Five-Year Annual ROI should be at

least 15% for a solid cash flowing property.


HowtoProfitwithSmallApartmentsbyLanceEdwardsp.3 Example: The 12 unit property above has a market cap rate = 8.5%. It’s mortgage balance at closing is $256,000. After five years of monthly pay down (by the tenants’ rent), the mortgage balance is $226,765. What is the five-year annual ROI?

A) Five-Year Cash Flow ($) = Cash Flow x 5 yrs = $12,000 x 5 yrs = $60,000

B) Since this is 5+ units, Market Value = NOI / Market Cap Rate = $30,000 / 8.5% = $352,941

à Equity at Closing = Market Value – Purchase Price = $352,941 - $320,000 = $32,941

C) Mortgage Paydown = Mtgage Balance @ Closing – Mtgage Balance after 5 years = $256,000 - $226,765 = $29,235

5-Year Total Return = (5 Yr Cash Flow) + (Equity @ Closing) + (Mtgage Paydown) = $60,000 + $32,941 + $29,235 = $122,176 per year Cash in Deal = $80,000 (from above) Five Year Annual ROI = 5-Year Total Return / Cash in Deal / 5 years = $122,176 / $80,000 / 5 = 30% per year!

That’s the power of apartments. The math for this property is explained on page 3.

What Are My Tax Benefits with Small Apartments?

You’ve seen that there are multiple ways to profit with small apartments, generated by the cash flow and equity gains. Uncle Sam has provided apartment owners and operators multiple tax saving strategies:

a. Lowest Tax Rate on Apartment Income – There’s passive income and active income, each are treated differently for tax purposes. Active income is your, job income which is taxed at the highest rate. Passive income for your apartment holdings - your mailbox money - is taxed the lowest rate.

Apartments afford you the ability to pay the lowest tax rate on the highest income – including 0% tax rate.


HowtoProfitwithSmallApartmentsbyLanceEdwardsp.4 b. Reduction of Your Taxes on Active Income – Even when you have active income, you

can reduce the income due thru depreciation tax benefits on your apartment building(s). The IRS allows you to take a paper write-off on your property’s value and deduct that from your active income, thereby reducing your taxes due.

(See your CPA about deductions limits and declaring yourself a real estate professional to remove the limits. Good news! You don’t have to be licensed to claim real estate professional benefits. In all likelihood, you qualify now. See your CPA).

c. Short-term vs Long-term Capital Gains on Apartments – When you sell an income producing asset and make a profit, there is a capital gains tax due. Well, if you own that asset for at least 12 months, you qualify for long-term capital gains tax rate – the lowest. Short-term capital gains tax is higher but still lower than your job income tax rate.

d. Tax-Free Sales of Apartments – Let’s say you’ve sold a small apartment building and

realized $400,000 in capital gains as cash. Want to avoid paying any capital gains tax on the sale of your building? Of course you do; then conduct a 1031 Exchange.

Section 1031 of the IRS code allows you to pay ZERO capital gains tax as long as you use your $400,000 profit to buy another piece of real estate. The 1031 Exchange is a very powerful way to hit $1 million equity (and beyond) in a just a few steps and with the help of Uncle Sam. Now, there are deadlines to the transaction and you’ll need to utilize a third-party 1031 Exchange intermediary but when you’re ready to sell, contact an intermediary and they’ll assist you in the strategy and timeline. It’s simple.

e. Tax-Free Refinance & Cash-Out of Apartments – Here’s

another way to leverage your $400,000 capital gains and not pay taxes. Instead of selling your building, you refinance it at the new higher value and pull the cash out. Since a loan is not a taxable event, you pay no tax.

Buy enough income-producing real estate and you won’t have to pay any income tax on your active income!

How to Pay ZERO Capital Gains Tax with Apartments…

Do this over and over to hit $1 million

equity in just a few steps.



So, you could refinance and cash-out 75% of your $400,000 equity for $300,000 cash tax-free. Use it for any purpose. A great use of it would be to buy a second building so now you own two apartment buildings – both generating cash flow and equity.

What Are My Exit Strategy Options?

Just as there are multiple tax saving strategies, there are multiple exit strategies. For definition purposes, an exit strategy is how you plan to exit (and profit) from the investment. You should know your exit strategy before you enter. Here are common exit strategies:

a. Forced Appreciation (stable property) – Forced appreciation (for 5+ unit properties) is a powerful wealth creation strategy in apartments. Forced appreciation recognizes that anything you do as an operator to increase the NOI, increases the value of the building and its cash flow. Recall the math discussion above:

Market Value = NOI / Market Cap Rate (for 5+ units) NOI ($/yr) = Revenue – Expenses

As an example, assume a ten unit building, with 85% average occupancy and $500 average rent. The expenses are $27,000 per year. So, the baseline revenue and NOI is:

Revenue = 10 units x 85% occ x $500 x 12 months = $51,000 per year NOI = Revenue – Expenses = $51,000 - $27,000 = $24,000 per year

Let’s assume Market Cap = 8.5% so the Market Value of the ten units is:

Market Value = NOI / Market Cap Rate = $24,000 / 8.5% = $282,353 (use $282,000)

Assume you put 20% cash down ($56,400 equity) so your initial mortgage balance is $225,600. At 5% interest and 30-year amortization, your mortgage payments are:

Mortgage Payments = $14,500 per year.

Hence, your cash flow is:

Cash Flow = NOI – Mortgage Payments = $24,000 - $14,500 = $9500 per year.



As the new owner, you want to raise the cash flow and the market value of the property. That means you need to raise the NOI, specifically the revenue. Yes, theoretically, you can also raise the NOI by lowering the expenses, but expenses tend to be one of those things you try to keep from rising. After all, when was the last time you successfully cut your taxes and insurance? Hence, there are two practical ways to raise the NOI: 1) raise the occupancy and/or 2) raise the rent.

The Compound Effects of Raising Occupancy The most powerful lever on boosting both the cash flow and value of an income-producing property is to increase its occupancy. On a stable property, it can be done practically overnight with proper marketing and a management company. Let’s forecast the impact of raising the average occupancy from 85% to 90% on this stable ten unit property:

New Revenue = 10 units x 90% occ x $500 x 12 months = $54,000 per year New NOI = New Revenue – Expenses = $54,000 - $27,000 = $27,000 per year

Recall the baseline NOI was $24,000 per year so at a new NOI of $27,000 per year, you’ve added $3000 per year cash flow to your pocket:

New Cash Flow = NOI – Mortgage Payments = $27,000 - $14,500 = $12,500 per year (up from $9500)

But let’s see the impact of your occupancy increase on the market value: New Market Value = New NOI / Market Cap Rate = $27,000 / 8.5% = $317,647 (use $318,000) New Equity = New Market Value – Mortgage Balance = $318,000 - $225,600 = $92,400 (up from $56,400)

That’s a 32% Increase in Cash Flow from a 5% Increase in Occupancy!

That’s a 64% Increase in Equity from the Same 5% Increase in Occupancy!



To recap, by increasing the occupancy a mere 5% on this stable ten unit property, you increased your cash flow $3000 per year (32% increase in cash flow) and your equity $36,000 (64% increase in equity)! That’s the power of the math. But we’re not done. Let’s examine the second means of boosting your cash flow and your equity: raising the rents.

The Compound Effects of Raising Rent Like most self-managed properties, the rents have probably not been raised in a while. You’re not going to make that mistake. Let’s now see the effects of raising the average rent from $500 to $520 ($20 per month) across all ten units:

New Revenue = 10 units x 90% occ x $520 x 12 months = $56,000 per year New NOI = New Revenue – Expenses = $56,000 - $27,000 = $29,000 per year New Cash Flow = New NOI – Mortgage Payments = $29,000 - $14,500 = $14,500 per year (up from $12,500)

You’ve raised your cash flow $2000 per year for $20 (4%) rent increase.

You now know that NOI affects not only cash flow but your equity as well. Let’s evaluate the impact of the rent increase on your equity:

New Market Value = New NOI / Market Cap = $29,000 / 8.5% = $341,000

New Equity = New Market Value – Mortgage Balance = $341,000 - $225,600 = $115,400 (up from $92,400)

To recap, by raising the rents 4% ($500 à $520), you boosted you cash flow another 16% and you boosted your equity another 25%! I know this is a lot of math so let’s summarize it all:

That’s a 16% Increase in Cash Flow from a 4% Increase in Rent!

That’s a 25% Increase in Equity from the Same 4% Increase in Rent!



Forced Appreciation Example – Stable Property Market

Value ($) Equity ($)* Cash Flow ($/yr)

Baseline $282,000 $56,400 $9500 per year

Step 1: Raise Avg. Occupancy 5% (85% à 90%)

$318,000 $92,400 (+ $36,000)

$12,500 (+$3000)

Step 2: Raise Avg. Rent 4% ($500 à $520)

$341,000 $115,400 (+ $23,000)

$14,500 per year (+ $2000)

Total Improvement for 5% Occ Increase & 4% Rent Increase

$59,000

+$58,000 (+102%)

+ $5000 (+48%)

*For this example, assume mortgage balance is fixed at $225,600

You can harvest that increased equity by selling the property or doing a refi cash-out. And recall all of the tax-free ways of harvesting your equity discussed above. This is a simple example on a stable property.

b. Forced Appreciation (rehab / turnaround property) - Let’s take the example of a

distressed ten-unit building with only 50% occupancy and $500 rent (same rent as above). Because it’s distressed, you can buy it for $150,000 but it needs $40,000 of rehab to spruce it up so you can fill it up.

For the $150,000 purchase, you put up 20% down payment, or $30,000 equity; so, your mortgage is $120,000. You utilize a line of credit for the $40,000 rehab. Your total loan balances are $160,000 ($120,000 + $40,000); and your combined loan payments are $860 per month, or $10,320 per year. Now that you understand the math from the previous example of a stable property, let’s quickly jump to the results of stabilizing the property, or raising the occupancy 40% (from 50% to 90%). From our above analysis, we know that the Market Value of the ten unit is $318,000 at 90% occupancy and $500 average rent. And the NOI is $27,000 per year, once stabilized.

When You Do it on Rehabs & Turnarounds, it Becomes Big Math on Small Properties…



What’s Your Immediate Profit from Stabilizing a Turnaround Property?

Forced Appreciation Example –

Rehab / Turnaround Property (Equity) Market Value $318,000 Purchase Price - $150,000 Rehab Cost - $40,000 Gross Equity $128,000

You can harvest that equity by selling the property or refinancing it at the higher value to extract your equity tax-free. Then use the cash to repeat the process.

What’s Your Cash Flow from

Stabilizing a Turnaround Property?

Forced Appreciation Example – Rehab / Turnaround Property (Cash Flow)

NOI $27,000 per year Loan Payments - $10,320 per year Cash Flow $16,680 per year Cash-on-Cash Return 56% per year

From the exercise on the stable property above, you know that if you raise the rents $20 on the ten units, you increase your cash flow another $2000 per year from $16,680 to $18,680 per year. And your equity is boosted another $23,000 so your equity increases from $128,000 to $151,000.

That’s big math on small income properties.

c. Long-term Buy and Hold – Whether you buy a stable property or a fixer-upper, the prominent strategy is to buy and hold. You do this for passive income (your mailbox money) and your wealth creation. With every door which you add to your portfolio, you create more financial options for you and your family.

Your initial objective is to accumulate enough doors until you have all of your bills paid by passive income. That’s financial independence – when you have options: you can choose to continue at your job or fire your boss; or you can retire your spouse from his or her job; you can stop your real estate acquisitions or accumulate more doors to enhance your lifestyle. Those are good choices to have.

Imagine knowing each month that you have your

bills paid even if you don’t do anything.


HowtoProfitwithSmallApartmentsbyLanceEdwardsp.10 Let’s say you need $6000 per month, or $72,000 per year, to easily pay your bills and create financial interdependence for yourself. Well, if we look at the stable ten-unit property above, it produces $14,500 per year cash flow after bumping the occupancy 5% and the rents 4%. That means…

$72,000 per year goal / ($14,500 cash flow per 10 doors) = 50 doors Under this scenario, your target for financial independence is 50 doors, a mere 50 doors. You could achieve it by doing five ten-unit transactions. Or you could do one ten-unit transaction and then do a single forty-unit transaction as the next one; which means you could be financially independent in just two moves. Cash flow sets you free. Forced appreciation and your mortgage pay down will make you rich thru wealth accumulation. Recall the Five-Year ROI effect from your tenants paying down your mortgage each year, combined with your forced appreciation from nudging rents and occupancy. That’s the real power of buy and hold. But… Let’s look at the math here in reducing your tax bill to Uncle Sam on your job income. You own ten units which you purchased for $282,000. The land is valued at $32,000 so the building’s value is $250,000. The IRS allows you to depreciate the value of the commercial building over 40 years and deduct it as a paper loss on your annual income tax return.

$250,000 / 40 years = $6250 per year tax deduction

When your CPA declares this $6250 depreciation on your tax return, you can deduct it against $6250 of your active job income - which means $6250 of your job income is tax-free; saving you approximately $2000 per year in taxes. Buy five times as much property as you’ll save $10,000 in annual income taxes.

Remember to ask your CPA about declaring you a real estate professional to maximize this benefit (no real estate license required; just work 500 hours per year in your real estate business).

You could be financially

independent in just two moves.

Don’t Forget the Extra Buy-And-Hold Tax Benefit of Depreciation



How to “Cap-Out” a Property

d. Fix and Flip – As shown above on the rehab / turnaround property example of forced appreciation, “fix and flip” is how to rapidly boost your net worth in a few moves. If you’ve seen the reality TV shows on fixing and flipping houses, you may have some idea of the practice. (However, you should realize that those shows are made to entertain and are largely staged.)

But unlike single family, where it’s an art to predicting the future value of the rehabbed house, in multi-family it’s science. We can always predict the future value of a stabilized property by the formula you’ve already learned:

Market Value = NOI / Market Cap Rate You calculate the NOI at the stabilized occupancy and rent, and you run your math based on that stabilized NOI. And if you already have a rehab team, don’t you think it would be more efficient to rehab a single ten-unit property in a single location than ten scattered houses?

How to Profit with Small Apartments Reprinted with Permission of Lance Edwards

Author of #1 Best-seller, How to Make Big Money in Small Apartments

Get the Best-Selling Book FREE, Visit: www.FreeApartmentsBook.com

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