Investment Due Diligence - Report
PH Oro Verde
El Cangrejo, Panama City
Construction 1491,66 m2, 1235,21 m2 Lot Size
Actual Rent Income - USD 8,000 Monthly (Has 1 empty apartment)
Possibly USD 1,400,000 - ROI 6.63%
As conventional apartment building
General Information:
Location:
PH Oro Verde, Enrique Genzier Ave., El Cangrejo, Panama City.
Year of Construction: 1986 (36 Years*)
Date of Purchase by Current Owner: 16 May, 2001 (21 years ago)
12 Apartments y 2 stores in the first floor. All the apartments have parking spaces
At the moment it generates USD 8,000 Monthly – With a possible increase to 8,600 – There is one empty apartment
Estimated ROI after costs of 7%
Structure of the Report
The building in its current state is a good medium term investment opportunity, but there are ways to get a bigger ROI with small changes in the commercial structure of the property. Below you´ll see the structure of the report.
Current Estimated Status
Possible Low Cost Alternative Use
Revenue and ROI
Proposed Business Opportunity
Keep Reading! We are talking about a lot of money.
Not everyone is a fan of reading, but in this case this is important. Understanding this information could mean several thousand dollars.
Section 1
Current Status
The building at the moment consists in 13 apartaments of 114.7m2. 12 of them are being used as rental apartments and 1 of them, on the first floor, was divided in 2 stores, both rented at the moment. All the apartments are legally divided into separate entities, ready to either be resold to separate investors, or be used as collateral for financial transactions.
According to the administrators for the current owner, the building is generating a monthly passive income of around USD 8,000.00 as a rental property. There is one empty rental apartment, but in the area, they are usually rented for around USD 600.00 a month, so even if there is room for improvement, it wouldn´t be that much. However, there are simple ways of pushing those numbers up if the new owners were willing to get actively involved with the property.
Section 2
Possible Low Cost Alternative Model
Contracts with tenants usually last 12 months. Therefore, during the first year of ownership, all the contracts will come to an end. Instead of renewing them, would be good to cancel them, get the apartment back, fix what needs to get fixed, get simple furniture and get it on Airbnb. The numbers for El Cangrejo and nearby areas are quite favorable.
According to data from Airdna, the average price for a night in a 2 Bdr apartment near El Cangrejo stands at around USD 75 per night, with occupancy rates standing at around 70% for the month.
Every time a tenant’s contract expires, the owner could list the unit on Airbnb for around USD 55 dollars and charge USD 25 dollars as a cleaning fee. That would raise the income generated from the apartment from a maximum of USD 600 a month to around USD 1200 a month, with expenses of around USD 200 per unit.
That includes hiring a permanent employee dedicated to cleaning the units and the cost of electricity.
This numbers could be achieved by renting them 30% below the market average and for 50% of nights a month, again, below average.
Section 3
Revenue and ROI
This is a summary of the theorical income generation capacity of the property in its current state.
Performance Estimate:
Monthly Income - 15 nights a month
USD 80 per night
Rent: USD 55 per night + USD 25 Cleaning fee
USD 1,200 per 15 nights
for each of the 12 apartments
Monthly Expected Costs (16.6%)
- USD 200
for each of the 12 apartments
The 2 stores in the first floor could be either kept as rental properties, generating around USD 1,000 a month, or could be used to provide additional services to tenants, like a small business center cafe or a laundry. In case of providing extra services to the area, we could be expecting around USD 1,500 a month in extra income.
Total
USD 13,500
Monthly income after expenses for the 12 apartments and the stores
ROI:
Value According to Appraisal
USD 2,300,000.00
Book value of the building + value of the land. Banks will lend up to 70% of this value in a mortgage against the property.
Purchase Price
USD 1,400,000.00
Possible cost of adquisition after negociation. Original price stands at USD 1,800,000, but they are willing to negociate depending on the payment method.
Immediate profit in book value for buyer
USD 900,000
at a USD 1,400,000 purchase price
Estimated Yearly ROI
11.57%
Total Anual Yield. This number could increase by either managing to increase the cost per night or by increasing the number of rented nights.
Section 3
Proposed Business Opportunity
There are many investors, from investment funds to family offices, looking for passive income opportunities that generate around 7.5% a year. The idea would be to set up the business and either keep it as an income generating asset, build a bigger building with up to 74 2bdr rental apartments (the maximum allowed by the zoning laws there at the moment) or just resell the property for its new fair market price.
Fair Market Value as Income Generating Property
USD 2,200,000
If units generate USD 80 a night and are rented 50% of the nights – Conservative Scenario
Estimated Profit After Cost
USD 700,000
PLUS ALL THE RENTS COLLECTED UNTIL RESELLING
Final ROI
+50%
ON TOTAL PURCHASE PRICE, FURNITURE AND EQUIPMENT
Disclaimer
The results of the report are not responsability of Ceetio nor any other involved party. They don’t reflect personal nor particular agendas. They are the result of a detailed analysis of available data, both statistical and legal, and previous experiences in the industry. All this information can be verified and comes from public sources available to anyone.
The assessments on this report are recomendations. Therefore, feel freely to take them into account or not.
Trust but Verify!
Like the popular says goes, trust but verify. If you can the code or press it, you’ll access some of the data we gathered to build this investment report.
All the information in this report, bar our personal texts with the owner, come from public information available to anyone.
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