True Summit Investments
Real Property Wealth Building

Case Study

Our Process in Action

Randall Court

Randall Court is a 44 unit property in Gladstone, MO that was purchased in October 2013.

The property exemplifies the True Summit Investments approach.


Pre-Purchase at a Glance

  • 44 units in poor shape, 60% occupied, purchased for $1mm in Oct 2013, $22,727 per unit.
  • $200k estimated for improvement capital, or $4545 per unit. Effective purchase price totaled $27k per unit.
  • Comparable apartments in good condition in the area were trading for $45k-$50k, $18k per unit more than Randall Court.
  • Estimated capital need - $340k in equity, $870k in debt
  • Investment decision in a nutshell - equity investment of $7,340 per unit, potential upside of $18k per unit.
  • Estimated end of year 2 NOI (NOI = net operating income = revenue minus operating costs) at $142k for cap rate of 11.75% on $1.2mm effective price
  • Estimated end of year 2 cash flow of $71,000 vs $342,000 equity, for pre-tax cash yield of 20.7%

At Purchase Closing

  • Actual financing sources of funds: $323k equity, $870k debt
  • Actual uses of funds: $1.015mm purchase, $178k operating capital
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Performance Review - 3 Years After Purchase

  • Used $177k operating capital plus operating cash flow to upgrade all units over first two years of ownership
  • Grew revenue from $207k at purchase to $330k at YE16
  • Grew NOI from $37k at purchase to $170k at YE16
  • Refinanced in Aug 2016. Reappraised at $2mm, 80% LTV given, new loan proceeds of $1.595mm.
  • Remaining original loan balance of $790k paid off
  • $805k net proceeds from refinancing, all tax free
  • Approx. $95,000 in operating cash flow until refinance

Summary

~$900k total cash flow extracted by August 2016 from a $323k original equity investment in October 2013, a 2.78x return on investment (ROI) in <3 years. IRR of approx. 37%. Property is still owned and generating monthly cash flow averaging $8k per month.