LUCY S APARTMENTS Offered by Lloyd Kaipainen PC SJ Fowler Commercial 5019 N 22 nd Ave Phoenix AZ 85015 $495,000 9 U N I T S E L L E R C A R R Y O P P O R T U N I T Y SJ Fowler Commercial/Investments 2200 E Camelback Road #110 Phoenix AZ 85016 www.phxazapts.com 602-265-6617 The information within has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates are used for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction, the suitability of the property for your needs.
Lucy s Apartments 9 U N I T S I N P H O E N I X A Z PROPERTY OVERVIEW Lucy s Apartments is a nine unit apartment community located in Central Phoenix just North of Camelback Road on North 22 nd Ave, just steps away from the Light Rail Station at 19 th Ave and Camelback. Lucy s Apartments consists of a single family home, a duplex and a six unit building with plenty of parking for all nine units. Eight of the units are two-bedroom one-bath with the last unit being onebedroom. There is an onsite laundry, tenant storage and mature landscaping keep this complex full! All but one unit has Satillo tile or VCT flooring with carpet in the bedrooms. In 2011, new 30 year roof s were installed on all three buildings. More recently, a new parking lot has been installed. Lucy s Apartments are set apart and more accurately above other complexes in the area due to the long term owner s attention to detail and quality of repairs and upgrades. After a tour of the property you will see the difference between this property and most others on the market that are being flipped after some minor cosmetic repairs. For this reason, more than half of the tenants are long term residents! The seller is offering terms: 7% interest rate, based on a 30 year amoritization, balloon due in 7 years. Page 1
PROPERTY FACTS Lucy s Apartments 5019 N 22 nd Ave Phoenix AZ 85015 $495,000/$55,000 per unit One Single Family Home with two bedrooms 1,464 SF* includes the laundry space One One-Bedroom Units/452 SF One Two-Bedroom Units/552 SF Six Two-Bedroom Units/792 SF* Three Buildings/One & Two Story Total Lot Area: 24,480 SQ FT* Total Building Area: 7,218 SQ FT* Constructed in 1969/1972/1986 Concrete Block/Frame Stucco Parcel # 153-25-081 Census Tract 107300 Property Class B- Flood Zone X 1 Property Taxes 2012: $2,652 2011: $2,877 2010: $3,373 * Per Assessor Page 2
2012 PERFORMANCE/2013 FINANCIAL FORECAST Income 2012 Actual 7 Two Bedroom Units* (1 @510, 2 @ 540 & 4 @ 550) Proforma Monthly $541 Month $575 Month 1 One Bedroom Unit* $416.50 $450 Month Two Bedroom Home* $585 Month $650 Month Proforma Annually 2012 Actual Income/Proforma Income $48,455 $5,125 $61,500 Less Vacancy/Credit Loss 10% N/A $513 $6,150 Gross Effective Income $48,455 $4,612 $55,350 Laundry Income $1,133 $167 $2,000 Effective Income $49,588 $4,779 $57,350 Expenses Current Proforma Proforma Annual Monthly Annually Taxes Actual 2012 $2,652 $225 $2,700 Insurance Actual 2012 $2,924 $250 $3,000 Trash Service Actual 2012 $2,650 $225 $2,700 Water/Sewer Actual 2012 $4,713 $417 $5,000 Electric (House Meter/Laundry) Actual 2012 $1,380 $117 $1,400 Management: Proforma 7% of Effective Income $0 $342 $4,109 Maintenance Actual 2012 $1,726 $208 $2,500 Accounting/Legal/Advertising Actual 2012 $849 $83 $1,000 Total Expenses $16,894 $1,867 $22,409 Expenses % of Income 34% 38% Net Operating Income $32,694 $2,912 $34,941 Interest/Mortgage Expense Illustration Seller Carry Based on 30% down, 7% Interest, 30 year AM, Balloon in 7 years ------ $2,305 $27,663 Taxable Income $607 $7,278 CAP 6.6 7.1 GRM 9.8 8.05 *Current Rents for March 2013 Page 3
COMPARABLE SALES Subject: Lucy s Apartments, 5019 N 22 nd Ave, Phoenix AZ 85015 $495,000 $55,000 per unit $68.58 per SF Unit Mix: One 2 bedroom house One 1 bedroom unit Seven 2 bedroom units Built 1969, 1972 & 1986 Comparable 1: 5115 N 12 th Street, Phoenix AZ 85014 Sold for $581,494 on 2/29/2012 - $48,458 per unit - $58.20 per SF Unit Mix: Twelve 2 bedroom units Built in 1959 Comparable 2: 2741 W Colter St, Phoenix AZ 85017 Pending at $390,000 - $48,750 per unit - $53.99 per SF Unit Mix: Eight 2 bedroom units Built in 1987 Comparable 3: 1510 E Maryland Ave, Phoenix AZ 85014 Sold for $740,000 on 5/1/2012 - $52,857 per unit - $45.34 per SF Unit Mix: Eleven 2 bedroom units/one 1 bedroom unit Built in 1969 Comparable 4: 2012 W Orangewood, Phoenix AZ 85021 For Sale at $950,000- $59,375 per unit - $62.30 per SF Unit Mix: Sixteen 2 bedroom units Built in 1969 Page 4
comparable rentals Subject: Lucy s Apartments, 5019 N 22 nd Ave, Phoenix AZ 85015 Actual Rents: 2 bedroom House - $585 2 bedroom units - $541 1 bedroom unit - $416 Average $0.66 per SF Current rents are significantly below market Comparable 1: Casa Miguel Apartments 5124 N 21 st Ave, Phoenix AZ 85015 2 bedroom units rent $550 795 SF/$0.82 per SF Comparable 2: 6824 N 23 rd Ave, Phoenix AZ 85015 2 bedroom units rent $540 720 SF/$0.75 per SF Comparable 3: 5028 N 22 nd Ave, Phoenix AZ 85015 2 bedroom units rent $575 795 SF/$0.72 per SF Page 5
Location/maps Aerial Page 6
Subdivision Boundaries Page 7
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DEMOGRAPHICS Page 10
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Legend Input Cells Formula Cells Description Cells OSHOW DCF Analysis Input Sheet -4/2/2013 Property Assumptions Clear & Reset 1 Name Lucy Apartments 2 Location 5019 N 22nd St Phx 85015 3 Type of Property Home and 8 additional rental units 4 Purpose of Analysis For Client of Lloyd Kaipainen PC 5 Prepared By Lloyd 6 Size (Square feet or Number of Units) 9 7 Assessed/Appraised Value of Land Percent of Acquisition Basis 20.00% 8 Assessed/Appraised Value of Improvements Percent of Acquisition Basis 80.00% 9 Assessed/Appraised Value of Personal Property Dollar Amount $9,000 10 Useful Life of Improvements (Years) Residential 27.5 11 Useful Life of Personal Property (Years) 5 12 Acquisition Price $495,000 13 Acquisition Costs Percent of Acquisition Price 1.00% Instructions : 14 Potential Rental Income and Escalations Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 15 Potential Rental Income Yr 1 total amount and annual % chang $61,500 5.00% 5.00% 3.00% 3.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 16 Other Income (Collectable) Yr 1 total amount and annual % chang $1,133 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 17 Annual Vacancy Rates (Percent of Potential Rental Income) 10.00% 10.00% 10.00% 10.00% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 18 Operating Expenses and Escalations Yr 1 total amount and annual % chang Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 19 Total Operating Expenses $22,409 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Financing Assumptions 1st Mortgage 2nd Mortgage 20 Loan Amount Loan to Purchase Price Ratio 70.00% 21 Interest Rate 7.00% 22 Amortization Period (Years) 30 23 Loan Term (Years) 7 Twelve 24 Payments Per Year 12 12 25 Loan Costs Dollar Amount $1,000 Investor/Owner Assumptions 26 Ordinary Income Marginal Tax Rate 35.00% 27 Capital Gains Tax Rate 25.00% 28 Cost Recovery Recapture Tax Rate 25.00% 29 Anticipated Holding Period (1-10 Years) 7 30 Disposition Price Cap Rate 6.00% 31 Disposition Cost of Sale Percent of Disposition Price 6.00%
Cash Flow Analysis Worksheet Property Name Location Type of Property Size of Property (sf/units) Purpose of Analysis Prepared by Date Prepared Lucy Apartments 5019 N 22nd St Phx 85015 Home and 8 additional rental units 9 For Client of Lloyd Kaipainen PC Lloyd April 2, 2013 Acquisition Price Plus Acquisition Costs Plus Loan Costs Minus Mortgages Equals Initial Investment $495,000 $4,950 $1,000 $346,500 $154,450 MORTGAGE DATA COST RECOVERY DATA BASIS DATA 1st Mortgage 2nd Mortgage Improvements Personal Property Amount $346,500 Value $399,960 $9,000 Acquisition Price $495,000 Interest Rate 7.00% C. R. Method SL SL Acquisition Costs $4,950 Amortization Period 30 Useful Life 27.5 5 Total Acquisition Basis $499,950 Loan Term 7 In Service Date 1-Jan 1-Jan Payments/Year 12 12 Date of Sale 31-Dec 31-Dec Periodic Payment $2,305.27 12 Months % age 3.636% 20.000% Annual Debt Service $27,663 11.5 Months % age 3.485% 19.167% Loan Fees/Costs $1,000 TAXABLE INCOME End of Year 1 2 3 4 5 6 7 8 9 10 11 1 POTENTIAL RENTAL INCOME $61,500 $64,575 $67,804 $69,838 $71,933 $73,372 $74,839 $76,336 2 -Vacancy & Credit Losses $6,150 $6,458 $6,780 $6,984 $5,395 $5,503 $5,613 $5,725 3 EFFECTIVE RENTAL INCOME $55,350 $58,118 $61,023 $62,854 $66,538 $67,869 $69,226 $70,611 4 +Other Income (collectable) $1,133 $1,144 $1,156 $1,167 $1,179 $1,191 $1,203 $1,215 5 GROSS OPERATING INCOME $56,483 $59,262 $62,179 $64,021 $67,717 $69,060 $70,429 $71,825 6 TOTAL OPERATING EXPENSES $22,409 $23,529 $24,706 $25,941 $27,238 $28,600 $30,030 $31,532 7 NET OPERATING INCOME $34,074 $35,732 $37,473 $38,080 $40,479 $40,459 $40,399 $40,294 8 -Interest-First Mortgage $24,143 $23,889 $23,616 $23,324 $23,010 $22,674 $22,313 9 -Interest-Second Mortgage 10 -Cost Recovery-Improvements $13,939 $14,543 $14,543 $14,543 $14,543 $14,543 $13,939 11 -Cost Recovery-Personal Property $1,725 $1,800 $1,800 $1,800 $1,800 $1,800 $1,725 12 -Loan Costs Amortization $143 $143 $143 $143 $143 $143 $143 13-14 - 15 REAL ESTATE TAXABLE INCOME ($5,876) ($4,643) ($2,629) ($1,729) $983 $1,300 $2,279 16 Tax Liability (Savings) at 35% ($2,057) ($1,625) ($920) ($605) $344 $455 $798 CASH FLOW 17 NET OPERATING INCOME (LINE 8) $34,074 $35,732 $37,473 $38,080 $40,479 $40,459 $40,399 18 -Annual Debt Service $27,663 $27,663 $27,663 $27,663 $27,663 $27,663 $27,663 19-20 - 21-22 CASH FLOW BEFORE TAXES $6,411 $8,069 $9,810 $10,417 $12,816 $12,796 $12,735 23 -Tax Liability (Savings) (Line 16 ) ($2,057) ($1,625) ($920) ($605) $344 $455 $798 24 CASH FLOW AFTER TAXES $8,467 $9,694 $10,730 $11,022 $12,471 $12,341 $11,938
Cash Sale Worksheet MORTGAGE BALANCES End of Year: 1 2 3 4 5 6 7 8 9 10 Principal Balance - 1st Mortgage $342,980 $339,206 $335,158 $330,819 $326,166 $321,176 $315,825 Principal Balance - 2nd Mortgage TOTAL UNPAID BALANCE $342,980 $339,206 $335,158 $330,819 $326,166 $321,176 $315,825 ALCULATION OF SALE PROCEEDS END OF YEAR 1 2 3 4 5 6 7 8 9 10 PROJECTED SALES PRICE (Rounded to nearest 000) $672,000 ALCULATION OF ADJUSTED BASIS Basis at Acquisition $499,950 +Capital Additions -Cost Recovery (Depreciation) Taken $113,043 -Basis in Partial Sales =Adjusted Basis at Sale $386,907 ALCULATION OF CAPITAL GAIN ON SALE Sale Price $672,000 -Costs of Sale $40,320 -Adjusted Basis at Sale (Line 5) $386,907 - =Gain or (Loss) $244,773 -Straight Line Cost Recovery (limited to gain) $113,043 -Suspended Losses =Capital Gain from Appreciation $131,730 TEMS TAXED AS ORDINARY INCOME Unamortized Loan Fees/Costs (negative) $1,000 + =Ordinary Taxable Income $1,000 ALCULATION OF SALE PROCEEDS Sale Price $672,000 Cost of Sale $40,320 -Participaiton Payments on Sale -Mortgage Balance(s) $315,825 +Balance of Funded Reserves =SALE PROCEEDS BEFORE TAX $315,855 -Tax (Savings)on Ordinary Income (Line 22 x 35%) $350 -Tax on Cost Recovery Recapture (Line 17 x 25%) $28,261 -Tax on Capital Gain (Line 19 x 25%) $32,933 =SALE PROCEEDS AFTER TAX $254,311
Legend Input Cells Formula Cells Description Cells Before Tax EOY $ EOY $ After Tax 0 ($154,450) 0 ($154,450) 1 $6,411 1 $8,467 2 $8,069 2 $9,694 3 $9,810 3 $10,730 4 $10,417 4 $11,022 5 $12,816 5 $12,471 6 $12,796 6 $12,341 7 $12,735 + $315,855 7 $11,938 + $254,311 IRR = 15.60% IRR = 13.09% NPV @ 15.60% = NPV @ 13.09% = $0 O ($154,450) O ($154,450) 1 $6,411 1 $8,467 2 $8,069 2 $9,694 3 $9,810 3 $10,730 4 $10,417 4 $11,022 5 $12,816 5 $12,471 6 $12,796 6 $12,341 7 $328,590 7 $266,249 8 8 9 9 10 10