Reddick Property Rating: How to Choose the Best Real Estate Investments

Reddick Property Rating

How to Choose the Best Real Estate Investments

Who has read the eBook?

How we came up with this

� Different Markets � Different Rental Properties � Different Investors

4 ways to profit with Real Estate 1. Cash flow 2. Appreciation 3. Principal Paydown 4. Tax benefits

Which one is most important?

Cash Flow

Tax Benefits Principal Paydown

Appreciation

5 Property Classes Luxury Class A Class B Class C Class D Class

Determining Property Class

Orange County, CA

Fort Myers, FL

Year Median Sales Price Appreciation1989 $66,5001990 $69,100 4%1991 $71,100 3%1992 $70,900 0%1993 $76,900 8%1994 $77,600 1%1995 $77,500 0%1996 $78,500 1%1997 $85,500 9%1998 $88,600 4%1999 $94,200 6%2000 $97,400 3%2001 $125,100 28%2002 $133,300 7%2003 $151,900 14%2004 $187,200 23%2005 $269,200 44%2006 $268,200 0%2007 $252,100 -6%2008 $152,600 -39%2009 $87,600 -43%2010 $88,900 1%2011 $102,900 16%2012 $128,100 24%2013 $166,100 30%2014 $188,700 14%

Annual Average 6.1%

Indianapolis-Carmel, IN

Year Median Sales Price Appreciation1989 $71,2001990 $74,800 5%1991 $79,100 6%1992 $83,700 6%1993 $86,600 3%1994 $90,700 5%1995 $94,600 4%1996 $98,000 4%1997 $103,700 6%1998 $108,400 5%1999 $110,900 2%2000 $112,300 1%2001 $116,900 4%2002 $116,800 0%2003 $121,100 4%2004 $121,700 0%2005 $123,800 2%2006 $119,300 -4%2007 $120,500 1%2008 $111,200 -8%2009 $114,200 3%2010 $123,300 8%2011 $123,900 0%2012 $129,600 5%2013 $136,700 5%2014 $144,600 6%

Annual Average 2.9%

Appreciation Cap / Floor

Cap �  A Class = 5% �  B Class = 4.5% �  C Class = 4%

Floor �  All Classes = 0%

Appreciation Adjustment

�  A Class = .5% �  B Class = 0% �  C Class = -.5%

Knowing What’s Important

Property’s on the border

Fixer Upper vs Rent Ready

�  Renovations less than $10,000, multiple every dollar spent by 1.2

�  Renovations greater than $10,000, multiple every dollar spent by 1.5

Rules for Remodeling

Maintenance and Vacancy

Vacancy Example

A Class 365 days a year x 8% = 29.2 days a year

New Construction Maintenance

Maintenance Example

A Class Monthly Gross Rent x 5% = Monthly Maintenance Cost $1,250 x 5% = $62.50 per month

Marshall Reddick Financial Calculator

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marshallreddick.com


marshallreddick.com

Where to Invest

Property Classes

Cash on Cash vs Return on Investment

Average Class Cash-on-Cash Annual ROI

A 3.55 19.61 B 3.98 18.19 C 4.39 16.60

Median Class Cash-on-Cash Annual ROI

A 3.22 19.83 B 3.47 18.08 C 5.32 16.03

(using Conventional Financing)

What Property Class is for you?

How do you mathematically measure the success of each

investment?

Appreciation: Highest Return-on-Investment

Cash Flow: Highest Cash-on-Cash Return

◦ ROI (Return on Investment): =(Profit from sale / Total Cash Invested) / # of years held

Marshall Reddick Website


+ accumulated net cash flow $35,506.61 + equity from principle paydown $39,355.59 + equity from appreciation $103,612.50 - Selling expenses (typically 9%) ($23,140.13) = Profit from sale $155,334.58



=(Profit from sale / Total Cash Invested) / # of years held $155,334.58 $45,631.25 15



=(Profit from sale / Total Cash Invested) / # of years held $155,334.58 $45,631.25 15

ROI= 22.69%

◦  Cash on Cash Return: =Annual net cash flow / Total Cash Invested


�  $2,804.4 $34,326.38

Cash-on-Return: 8.16%


�  $2,804.4 $34,326.38

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Chris'n Tabar Real Estate Advisor/Realtor Phone: (949) 885-‐5162 Email: [email protected]

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