Angus Cartright
Dear John,
After our last meeting I have carefully analyzed the four different real estate projects that you would be interested in investing.
From what I understood your investment profile is:
- You have a $9 million budget to invest in real estates and other investments so I took the initiative to assume that you would invest from $5-$6 million in those projects (= 60%)
- You are now retired and therefore are looking for a passive, with minimal-risk investment
- The willing benefits of your investment should be: o Diversification (medium-high) o Protection from inflation (increase of cash flow of 3%) o Tax advantages o An expected minimum leveraged return of 12% after-tax
I have had different choices to come across, both qualitative and quantitative, in order to optimize your investment.
The first step was to choose between a residential property and an office property. A residential, multifamily, property is by definition less risky than an office building when comparing the tenant volatility risk. Indeed, rent is the first and most important expense for residing families whereas office rents directly depend on the good health of the involved companies and therefore on the structure of the economy, which are out of our direct control. Another factor is that the low number of tenants in an office building would bring up a greater risk if any of those chose to break the lease. The greater volume of tenants in a residential property would protect you from this kind of unforeseen risk.
I have therefore chosen to direct you towards the Allison Green and Ivy Terrace projects which are residential properties.
The Allison Green property was built in 2000 and holds a 95% occupancy rate whereas the Ivy Terrace project is still under construction and the occupancy rate is only a projected value of 93%, although guaranteed at that rate by contract for the next three years.
As I previously mentioned, one of the most important priorities in your investment
After our last meeting I have carefully analyzed the four different real estate projects that you would be interested in investing.
From what I understood your investment profile is:
- You have a $9 million budget to invest in real estates and other investments so I took the initiative to assume that you would invest from $5-$6 million in those projects (= 60%)
- You are now retired and therefore are looking for a passive, with minimal-risk investment
- The willing benefits of your investment should be: o Diversification (medium-high) o Protection from inflation (increase of cash flow of 3%) o Tax advantages o An expected minimum leveraged return of 12% after-tax
I have had different choices to come across, both qualitative and quantitative, in order to optimize your investment.
The first step was to choose between a residential property and an office property. A residential, multifamily, property is by definition less risky than an office building when comparing the tenant volatility risk. Indeed, rent is the first and most important expense for residing families whereas office rents directly depend on the good health of the involved companies and therefore on the structure of the economy, which are out of our direct control. Another factor is that the low number of tenants in an office building would bring up a greater risk if any of those chose to break the lease. The greater volume of tenants in a residential property would protect you from this kind of unforeseen risk.
I have therefore chosen to direct you towards the Allison Green and Ivy Terrace projects which are residential properties.
The Allison Green property was built in 2000 and holds a 95% occupancy rate whereas the Ivy Terrace project is still under construction and the occupancy rate is only a projected value of 93%, although guaranteed at that rate by contract for the next three years.
As I previously mentioned, one of the most important priorities in your investment