Orange County Investment: 11072 Magnolia Street, Garden Grove CA 92841

11072 Magnolia Street, Garden Grove, CA 92841

Commercial (Retail):

Year built: 1972,

Investment strategy: Rental Property

11072 Magnolia St is a miscellaneous (commercial) located in Garden Grove, CA 92841. Built-in 1972, this property features 2.58 acres lot, and 0.72 acres of living space.
For the surrounding community of Garden Grove, CA 92841, the nearby schools are very good and include Gilbert Elementary, Rancho Alamitos High and Louis Lake Intermediate. The overall crime risk for this area is low. The natural disaster risk for this area includes earthquake risk, low tornado risk, and moderate to low flood risk.

Purchase Price$ 9,895,000

Rent$ 73,302/mo

Monthly Cash Flow$ 20,582

Cash on Cash Return5.48 %

Financial Analysis

Cash on Cash Return	5.48 %
Internal Rate of Return (IRR)	11.58 %
Capitalization Rate	6.24 %
Gross Rent Multiplier (GRM)	11.25
Debt-coverage Ratio (DCR)	1.67
Operating Expense Ratio (OER)	27.59 %

Financial Breakdown

Purchase Price	$ 9,895,000
Purchase Costs	$ 54,423
Repair/Construction Costs	$ 0
Total Capital Needed Total Capital Needed Includes all projects costs (except selling costs). Total Capital Needed Includes all projects costs (except selling costs).	$ 9,949,423
Financing	$ 5,442,250
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 4,507,173
Cash at Closing Cash at Closing This number includes down payment and loan points. Cash at Closing This number includes down payment and loan points.	$ 4,507,173
Cash During Rehab Cash During Rehab Shows the cash amount remaining to fund the purchase and rehab/construction. Cash During Rehab Shows the cash amount remaining to fund the purchase and rehab/construction.	$ 0

Operating Analysis

Rent	$ 73,302/mo
Gross Operating Income (GOI)	$ 853,235
Total Expenses	$ 235,450
Net Operating Income (NOI)	$ 617,785
Annual Debt Service	$ 370,806
Cash Flow Before Taxes (CFBT)	$ 246,979
Income Tax Liability	$ 17,598
Cash Flow After Taxes (CFAT)	$ 229,382

Excellent opportunity to acquire a fee interest, 100% occupied investment in the competitive Orange County market. This multi-tenant Triple Net investment includes $.99 Cents Only, nine years remaining on the first term of a fifteen-year term, and two new tenants with ten years remaining.
Providing no rollover term for a minimum of nine years. Strategically located on a heavily trafficked intersection of Katella Av. And Magnolia St (ADT approximately 49,000 trips per day) in one southern California densest real estate sub-markets, Garden Grove.

Purchase Price	$ 9,895,000
Address	11072 Magnolia Street , Garden Grove, 92841, CA
Year Built	1972
Type	Commercial
Category	Retail

Annual Property Operating Data

Incomes		% of GOI
Gross Scheduled Income Gross Scheduled Income (GSI) Represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents. Gross Scheduled Income (GSI) Represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents.	$ 879,624
Total Gross Income	$ 879,624
Vacancy loss Vacancy and Credit Loss Part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants. Vacancy and Credit Loss Part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants.	$ 26,389
Gross Operating Income Gross Operating Income (GOI) An actual income which is expected to be collected in the property. Gross Operating Income (GOI) An actual income which is expected to be collected in the property.	$ 853,235	100.00 %
Expenses Operating Expenses Expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn't include mortgage payments or depreciation). Operating Expenses Expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn't include mortgage payments or depreciation).
Total Expenses	$ 235,450	27.59 %
Total Expenses	$ 235,450	27.59 %
Net Operating Income Net Operating Income (NOI) Important measurement calculated as gross operating income minus operating expenses. Net Operating Income (NOI) Important measurement calculated as gross operating income minus operating expenses.	$ 617,785	72.41 %

Cash Flow (Year 1)

Net Operating Income	$ 617,785	72.41 %
Annual Debt Service	$ 370,806	43.46 %
Cash Flow Before Taxes (CFBT) Cash Flow All the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property. Cash Flow All the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.	$ 246,979	28.95 %
Income Tax Liability	$ 17,598	2.06 %
Cash Flow After Taxes (CFAT) Cash Flow All the inflows and outflows of cash (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property. Cash Flow All the inflows and outflows of cash (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.	$ 229,382	26.88 %

Operating Ratios

Operating Expense Ratio Operating Expense Ratio Ratio of the operating expenses to the gross operating income (GOI). Operating Expense Ratio Ratio of the operating expenses to the gross operating income (GOI).	27.59 %
Break-Even Ratio Break-Even Ratio (BER) Another benchmark used by mortgage lenders, estimating how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less. Break-Even Ratio (BER) Another benchmark used by mortgage lenders, estimating how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less.	71.05 %

Financial Measures

Net Present Value Net Present Value (NPV) Probably the best measure of any investment thanks to its complexity; taking into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. More information and an example on the blog. Net Present Value (NPV) Probably the best measure of any investment thanks to its complexity; taking into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. More information and an example on the blog.	$ 3,037,903
Internal Rate of Return Internal Rate of Return (IRR) Rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero. Internal Rate of Return (IRR) Rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero.	11.58 %
Profitability Index Profitability Index Similar to NPV, also calculates with the present values of future cash flows and discount rate. It shows whether the present value of the cash flows is worth the initial investment. Good investment should be above 1.0 Profitability Index Similar to NPV, also calculates with the present values of future cash flows and discount rate. It shows whether the present value of the cash flows is worth the initial investment. Good investment should be above 1.0	1.67
Annual Depreciation	$ 202,974

Holding period of 10 years and discount rate of 5.00% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore don't provide such an exact information.

Investment Return Ratios

Cash on Cash Return Cash on Cash Return Ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It does not take in account the future value of money. Cash on Cash Return Ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It does not take in account the future value of money.	5.48 %
Return on Investment Return on Investment Very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year. Return on Investment Very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year.	13.16 %
Capitalization Rate Capitalization Rate Calculated as ratio of the net operating income and the value of the property. Capitalization Rate Calculated as ratio of the net operating income and the value of the property.	6.24 %
Gross Rental Yield Gross Rental Yield Used for a particular property or also as a market indicator when using median values of rent and house prices - counted from gross scheduled rent and initial investment. Gross Rental Yield Used for a particular property or also as a market indicator when using median values of rent and house prices - counted from gross scheduled rent and initial investment.	8.89 %
Gross Rent Multiplier Gross Rent Multiplier (GRM) Counted as a ratio of market value of the property and gross scheduled income. Gross Rent Multiplier (GRM) Counted as a ratio of market value of the property and gross scheduled income.	11.25

Financing
Down Payment		$ 4,452,750
Commercial Loan		$ 5,442,250
Loan to Value Ratio Loan to Value Ratio Shows sum of all purchase and rehab loans divided by purchase price. Loan to Value Ratio Shows sum of all purchase and rehab loans divided by purchase price.		55.00 %
Loan to Cost Ratio Loan to Cost Ratio Shows sum of all purchase and rehab loans to construction cost (purchase price + repairs). Loan to Cost Ratio Shows sum of all purchase and rehab loans to construction cost (purchase price + repairs).		55.00 %
Debt Coverage Ratio		1.67

Commercial Loan Financing of: Purchase price ($ 9,895,000)
Type	Amortized
Loan Amount	$ 5,442,250
Down payment (45%)	$ 4,452,750
Amortization	30 years
Interest Rate	5.50 %
Monthly Payment	$ 30,900.50

This chart shows the process of accumulation of investor's equity. There is some equity created right at the beginning with the rehab/construction and later investor's equity is rising by paying off the principal of the loan and also by appreciation over the years. All the green parts is the cummulative equity belonging to the investor and the red part belongs to the lender.

Year	0	1	2	3	4	5	6	7	8	9	10
Operational Analysis
Gross Scheduled Income	0	879,624	899,416	919,652	940,345	961,502	983,136	1,005,257	1,027,875	1,051,002	1,074,650
Vacancy Loss	0	26,389	26,982	27,590	28,210	28,845	29,494	30,158	30,836	31,530	32,240
Gross Operating Income	0	853,235	872,433	892,063	912,134	932,657	953,642	975,099	997,039	1,019,472	1,042,410
Expenses	0	235,450	240,159	244,962	249,861	254,859	259,956	265,155	270,458	275,867	281,385
Net Operating Income	0	617,785	632,274	647,101	662,273	677,799	693,686	709,944	726,581	743,605	761,026
Loan Payment	0	370,806	370,806	370,806	370,806	370,806	370,806	370,806	370,806	370,806	370,806
Payment Interest Part	0	297,494	293,359	288,990	284,375	279,500	274,349	268,908	263,160	257,088	250,674
Payment Principal Part	0	73,312	77,447	81,816	86,431	91,306	96,457	101,898	107,646	113,718	120,132
Cash Flow
Repairs/Construction	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-4,507,173	246,979	261,468	276,295	291,467	306,993	322,880	339,138	355,775	372,799	390,220
Depreciation	0	202,974	202,974	202,974	202,974	202,974	202,974	202,974	202,974	202,974	202,974
Taxes	0	17,598	20,391	23,271	26,239	29,299	32,454	35,709	39,067	42,531	46,107
Cash Flow After Taxes	-4,507,173	229,382	241,077	253,024	265,228	277,694	290,426	303,429	316,708	330,268	344,113

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 10 years. Below is the resale price calculated using different methods.

Appreciation (3.50%)	$ 13,957,875
Cap Rate (6.24%) & NOI	$ 12,195,924
Gross Rent Multiplier	$ 12,089,809

Sale Proceeds

Projected Selling Price	$ 13,957,875
Costs of Sale (5.00%)	$ 697,894
1. Loan Balance Payoff	$ 4,492,087
Net Sale Proceeds Before Tax	$ 8,767,894

In the resale analysis we do not include any calculation for taxes that might be owed on sale of the property. The tax laws for the resale are rather complex and subjected to frequent changes.

Net Assets and Yield

Net Assets
Sale Proceeds Before Tax	$ 8,767,894
Investor Cash Outlay	$ 4,507,173
Net Assets	$ 4,260,721
Average Yield
Annual Net Assets	$ 426,072
Average Cash Flow (After Taxes)	$ 250,723
Average Annual Gain (After Taxes)	$ 676,796
Average Annual Yield (After Taxes)	6.84 %

This charts shows Net Present Value (NPV) when property is sold in various years, i.e. when sold in 5th year, the NPV is calculated from 5 years of Cash Flow (including the selling price) and this NPV is displayed in year 5. Optimal holding period can be estimated, using this method - when NPV is the highest. Please note that appreciation growth can change these numbers greatly. It sometimes makes sense to sell the property even before the end of the mortgage term.

Property Report: Orange County Investment RENTAL

Property Report :

Orange County Investment

11072 Magnolia Street, Garden Grove, CA 92841

Executive Summary

11072 Magnolia Street, Garden Grove, CA 92841

Financial Analysis

Financial Breakdown

Total Capital Needed

Total Capital Needed

Cash out of Pocket

Cash out of Pocket

Cash at Closing

Cash at Closing

Cash During Rehab

Cash During Rehab

Operating Analysis

Property Description

Operating Analysis

Annual Property Operating Data

Gross Scheduled Income (GSI)

Gross Scheduled Income (GSI)

Vacancy and Credit Loss

Vacancy and Credit Loss

Gross Operating Income (GOI)

Gross Operating Income (GOI)

Operating Expenses

Operating Expenses

Net Operating Income (NOI)

Net Operating Income (NOI)

Cash Flow (Year 1)

Cash Flow

Cash Flow

Cash Flow

Cash Flow

Operating Ratios

Operating Expense Ratio

Operating Expense Ratio

Break-Even Ratio (BER)

Break-Even Ratio (BER)

Financial Analysis

Financial Measures

Net Present Value (NPV)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Internal Rate of Return (IRR)

Profitability Index

Profitability Index

Investment Return Ratios

Cash on Cash Return

Cash on Cash Return

Return on Investment

Return on Investment

Capitalization Rate

Capitalization Rate

Gross Rental Yield

Gross Rental Yield

Gross Rent Multiplier (GRM)

Gross Rent Multiplier (GRM)

Financing Overview

Loan to Value Ratio

Loan to Value Ratio

Loan to Cost Ratio

Loan to Cost Ratio

Long-term Cash Flow Forecast

Resale Analysis

Resale Price Evaluation Methods

Sale Proceeds

Net Assets and Yield

Photos