REAL ESTATE INVESTMENT ANALYSIS Harvard Case Solution & Analysis

REAL ESTATE INVESTMENT ANALYSIS Case Solution

Market Preview

            Much has happened in the Apartment world since December of 2014 and the metros among the apartments in Florida have achieved the highest rental growth. The job market is also growing significantly. The Bay area department markets of Florida have held around three of the top four spots on the list of Axiometrics for achieving the highest annual rental growth based on the number of the units among the top 50 metros in the area. Along with this, the South Florida metros such as West Palm Beach, Fort Lauderdale and Miami have held three positions among the top 13. The tourism industry is also picking up in Florida during the past two years and also due to the improvement in the economy.

The occupancy rates in Orlando and Miami have been highest in the region and the South Florida has been seen as a strong apartment market. The Tampa and Orlando metros have achieved growth rates of around 5% to 7% in 2016, however, the only metro which has achieved a double digit growth rate is the Sacramento metro. But the South Florida rental market is back in action and the rental would see a strong growth over the next few months. The speed of new construction is continuing to accelerate in Florida especially in the Suburb locations such as Broward County.

This is because of the deepening of the pool of the renters and the rapid growth of the population. New employment opportunities are also being created and the demand for the home ownership is declining. Competition would be from medium to high. This is because it has been projected by the national real estate brokerage Marcus and Millichap that around 10,200 new apartments would come to the market as compared to only 8700 in the year 2015. This is a huge increase of around 17%. However, still the South Florida market forecasts based on the Real Capital Analytics and the Costar Group analysis show that the apartment owners in this region would cover higher average rents than their counterparts in Miami-Dade this year. The average rental in the region is between $1300 and $2300 per month.

Marketability

The name of the property is Sterling Crest, which is located near Doral southeast of the I-75/Turnpike Interchange. This is a one hundred unit apartment complex and the units include 20 one-bedroom, one-bath units and 60 two-bedroom, two-bath units and 20 three bedroom two bath units. The units were completed last year and are leased at this moment. The complex also has most of the required amenities. The apartment includes spacious walk in closets, designer kitchens, dryer and the full size washer. The apartment also offers a swimming pool, clubhouse, spa, fitness center along with the play room for the children. This home apartment complex has been designed to outclass trend and time. The amenities of the apartment include:

  • Air Conditioning
  • Alarm System
  • Broadband Internet Access
  • Cable or Satellite
  • Carpet
  • Ceiling Fan
  • Dishwasher
  • Extra Storage
  • Garbage Disposal
  • Internet Access
  • Walk In Closets
  • Washer Dryer Hookup
  • Window Covering

            The median income in the area has been around $61,900, which could be considered as favorable if we compare it with the monthly rental rates of the commercial apartment. The apartment has been completed with all the furnishing last year worth $600,000 and it also included the exterior paint and landscaping. This is not an old apartment complex and it offers all the modern day amenities which are provided in the modern apartment complexes. However, the size of the property is small therefore, the large real estate investment firms do not seem to be interested in purchasing this kind of a property and thus, the smaller local investors are more interested in this 100 unit property. On an average this property is stabilized at an occupancy rate of more than 94%. Moreover, the upside in rents and the growth of the population in this region of Florida both make this property highly profitable. Finally, this property could also be converted into Condos in future years if the commercial market heats up..................

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