Buy real estate, they ain't makin' any more of it.
Will Rogers
Case Study Examples
Case Study #1:
2004 Exchange of 32-unit Apartment Property for 3-Net Leased Properties
"Jane," who lives in San Francisco, sold a 5 unit property in San Francisco in 1997 and purchased a 32-unit complex in Santa Rosa. Over the years, she had both on site and off site property management. Her cash flow was well over 10% on her initial equity when she sold the property 7 years after purchasing it. |
Her goal when she bought the property was to replace or increase the cash flow of the San Francisco building and to put the equity to work in a non-rent controlled market. "Jane's" goal when she exchanged for three 3 Net Leased real estate investments in 2004 was to replace the cash flow (which had grown substantially over the years) and eliminate or vastly reduce the management so that she could travel.
Due to good market conditions, she was able to sell the properrty she had originally purchased for $1,410,000 for $3,210,000. She was also able to purchase a portfolio of 3 Triple Net properties which provided a diversified income stream as well as accomplishing geographic diversification. According to "Jane", the exchange properties not only produce similar income to the apartments she sold without requiring much management, the amortization on the 3 loans is paying down principle on a shortened 20 year schedule.
'''Jane's" words of advice:
- Start shopping early
while the downleg property is on the market. That way you can make educated
offers once your property sells.
- Be prepared for a more complicated loan
approval process with the commercial properties.
- Expect to be dealing with
miscellaneous issues (rent, property taxes, insurance) for 6 months after
the sale(s) close until all the parties have correct mail, contact, and
payment information.
- If you plan on selling a Northbay apartment building, hire Scott Gerber to do it!
Scott's attention to detail, judgment, and understanding of the marketplace have helped us to realize and exceed our financial goals...
Susan Moxon
TOPCase Study #2
Seller Financing 30 Units
Mr. and Mrs. Martin had owned their well-located Sonoma County property for close to thirty years. When the management and maintenance of the property became too much to handle they asked Scott Gerber to market the property. After looking at 5 unacceptable offers, they sold the property to a strong buyer with a $1,250,000 down payment and instead of exchanging or cashing out, they provided the financing. This resulted in annual income to the seller of over $200,000 which was the same income they had enjoyed during ownership but without the headache of ownership and management.
Mr. and Mrs. Martin were able to sell using this structure, which only required them to pay capital gains tax on the down payment. They deferred the gain on the balance of the sale price which was in the form of a first deed of trust between themselves and the buyer.