Monday, March 31, 2014

February Apartment Update

Things continue to cruise right along at the Houston apartment complex. Occupancy remained the same as last month at 96%. Total revenue was $201,000, a small decline over January's $204,000. Cash flow was a positive $12,000 for the month. The $6,000 drop in cash flow over January was due to our lender not collecting the appropriate amount for escrow. They need to collect a bit extra for a while, then the escrow amount will drop back to normal. The good news is that, even with the temporarily increase escrow collection, the property's cash flow is still $27,000 over budget. Granted, it's only the second month of the year, but that's a good sign.

No word on the sale of the property, which I am taking to be good news. It's in escrow and things are, I assume, moving along without major problems. I believe it's scheduled to close escrow mid- to late- April.

Tuesday, March 04, 2014

January Apartment Update and HML #30

First off, my hard money loan #30 was paid off a couple weeks ago. This only lasted a couple of months.

On the apartment front, occupancy was at 96% for January and the total revenue hit almost $204,000 - the highest ever. Cash flow was a positive $18,000 for the month. As mentioned last month, there was a fire at the property around Christmas time. The insurance adjuster and an engineer have been out to examine the property but we have not yet received their report. The year is starting off well and with just one month under our belt, our income is already almost $17,000 over budget.

Which brings me to the next point - the possible sale of the property. It's looking good so far. The buyers have completed their inspections and the bankers are now working on going through the process of getting the buyers approved to assume our loan. Once that is done, the sale can progress. At least point, we are estimating a close of escrow around the middle to end of April.

Tuesday, January 28, 2014

December Apartment Update

The December numbers just came in. Occupancy continued at 94% and revenue stayed about the same as last month. Next income dropped by about $11,000 to $14,000 however, due to an escrow analysis from our lender which discovered we needed to be putting more into our escrow account for insurance. This resulted in about a $6,000 increase in our monthly mortgage payment for the month.

We also found out the property suffered a "fairly significant fire" the first week of January, caused by a dry Christmas tree. Four units were destroyed and there was damage to the entire building, which contains 18 units. Thankfully, there were no injuries. An insurance claim has been filed and management expects full coverage, not only for damages, but also for rent loss until the building can be repaired and re-rented.

The escrow increase is a disappointment. That represents a 25% chunk of our monthly net income. No word on if this is a permanent increase, or the lender needed a lump sum to bring the escrow account up to a certain level and the regular monthly increase will be smaller. But, as the fire shows, insurance is needed.

Rent concessions almost tripled in December over November, but that's understandable, given it is a big holiday month and people likely need some encouragement to move during the holidays. I know I would.

For the entire year of 2013, the property ended up with a positive net income of just over $150,000. That's about $135,000 over budget. It looks like this was the turn-around year for the property.

Friday, January 24, 2014

Delayed November Apartment Update

I've actually had the November financials for the Houston apartment sitting in my inbox for a couple weeks. The December ones should be arriving any day now, so I've been putting off writing anything so I could  write a single post for the combined two months. Well, the December info isn't here yet, so I figured I better get something out for November before it falls too far in the past.

Occupancy remained at 94%. The property had a positive cash flow of a tad over $25,000 for the month. This is actually the highest monthly cash flow of the year, beating out August's number by just over $100. Rent concessions dropped. Our overall income for the month increased by about $2,000 over October.

On the other hand, expenses also increased over October - but only by about $1,000. We saw increases in marketing, apartment turnover, and repairs. These were partially offset by a large decrease in administration expenses.

Management says the last 10 months of positive cash flow have allowed us to pay off $100,000 of aged accounts receivable over the course of the year. Now our balance sheet shows our accounts receivable greater than our accounts payable, so we look to be finally rid of all those old debts we accrued during the bad years. The property is currently $124,500 over our budgeted net income for the year. That's good news.

No word yet on the potential sale of the property. One of the potential buyers requested a four month or so examination period and we're still in that, so I suppose this is a case of no news is good news. I hope we get an update with December's numbers, but we may not.

Tuesday, December 17, 2013

HML #30 Started

Things have picked up lately. After a period of low activity, it seems our borrowers are now once again buying properties. My partner has five loan requests to evaluate. Here are the details of the one I invested in.

This is a vacant single family home in Vallejo, California - in the San Francisco Bay area. It's a 1,310 3 bed, 2 bath home with an attached 2 car garage. It was built in 1994 and it sits on a lot just over 6,000 square feet. The front exterior of the property looks nice, although the back needs some work. Some landscaping needs to be done and, in fact, there were landscapers there working when my partner went to look at the property.

The borrower is our biggest borrower and he purchased the property for $141,000 at a foreclosure auction.The opening bid was $132,000, so others wanted this one as well. estimates the property to be worth $180,000. Based on MLS sales of comps, my partner estimates it to be worth $225,000 as-is and $265,000 after repairs. There are five good comps in the MLS. Four of them were short sales. Three of the five sold for more than the listing price. One of the comps is from May and the rest of 3 months old or less. All sold for higher than their "Zestimate." (Really, the only usefulness of their estimate, IMHO, is to get a ballpark figure of value. I'd never use it as a basis for REI analysis.)

My partner gives the neighborhood a not so good rating, but that normal for this borrower. He specializes in those areas. In terms of the loan, we are lending $105,000, giving us a 74.5% loan to value ratio using the auction buy price. Using our as-is estimate of $225,000, it's a LTV of 46.7%. The biggest drawback to this loan is that it is in an area we don't normally lend in and that our borrower doesn't usually buy in, meaning we could be off on our value estimates.

Here are some pictures.

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