This month I want to highlight a new listing that could be an excellent investment property for one of my readers. I am often asked if I know any properties for sale that are like this one. The property consists of 2 buildings that were built in 2000. One building is fully leased to 1 tenant and the other is a duplex building with 2 tenants. This offers the ease of only 3 tenants, but also more security than a single tenant property, in case one of the tenant’s leaves. The property is well located near S. Airport Road behind Art Van at 1760 & 1764 Forest Ridge.
The actual cash received in the first year is $89,040 which is a 10% Cap rate (this is the return based on a $895,000 sale price, if an investor paid all cash). Based on the anticipated income after accounting for vacancy, reserves & commissions it is an 8.7% return. If you scroll to the last page of the analysis you will see 3 different sale price scenarios ranging from selling at an 8%, 9%, or 10% cap rate. Based on the sale at a 9% cap rate, the internal rate of return (IRR) is 20.6% on the initial investment (the buyer’s 20% down payment plus loan fees and acquisition costs). For an investor in the 36% tax bracket, this represents a 14.63% return after taxes, which is a lower effective tax rate than they would have in alternative investments. Most of the properties that have been listed with this type of potential in the past few years have been bank owned and not fully occupied. This one has been well managed, is fully leased and is priced to sell.
Dan Stiebel, CCIM