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Real Estate Income - Where Art Thou?

Some of you may know that in addition to real estate, we have sold financial products for many years. You are probably familiar with the standard annuities, life insurance products, etc., that we offer clients for retirement planning.

The problem or perhaps I should say the challenge, has always been finding a safe investment that will provide income and a chance for appreciation.

You can buy indexed annuities, income funds or even bonds. But, none of these investments really satisfy the requirement of producing income while appreciating much more than inflation. At some point you will find yourself spending down the principle or tightening your belt.

The Baby Boomer generation is going to have a tough time converting their savings into retirement income.

Enter the Office Condo

The conversion of residential properties to condos has been going on for quite some time. It is to the point where we do not recommend them unless someone wants a buy and hold investment. The same phenomena has occurred in the office market. Developers are buying up commercial space and selling the offices as condos.

The Difference Between Office and Residential Condo Conversions

Income and Appreciation

The units we offer are through a national commercial real estate developer and management company. We can show with some precision, what your income will be from the investment and project a reasonable approximation of appreciation.

For example, we have space that is being rented by a national manufacturer of electronic controls. The space is being offered at $435,000. With 50% financing, the average yearly Cash on Cash Return is 5.9% and the Net Operating Income is 7.4%. With appreciation, the IRR (Internal Rate of Return is 24.7%. If you do not understand these terms, ask your accountant). This is a 4 year lease.

We have a space that is selling for $2.23 million and the cash down required is about $670K. Believe it or not, many of our investors have this much sitting in equity, stocks, 401K plans, etc. This is a tenant with a 3 year lease and 3 year renewal option. The return is 6.0% and the IRR is 27%. Are you making 27% in the market while earning 6% income?

There are units at many different price points. If you want to build equity fast because then we can build spec homes. But if you want to hold on to what you have, get income and continue to build equity through appreciation, then this might be the right investment for you. Call me for details.

Martin Unger
Real Estate Investments

- Pre-Construction
- Spec Homes
- Condos
- New Homes
- Land
- Relocation

954 - 255-5056 (office)
954 - 461-0319 (cell)
775-254-2881 (fax)

(an associate of London Realty Corp)

9000 Sheridan Street
Suite 90
Pembroke Pines, FL 33024