Portfolio Analysis
Based on historical metrics, three percent of investors typically transact in the Southern California multifamily marketplace at any given time. The remaining 97 percent of investors hold or keep the status quo for the given period for various reasons. For most investors, real estate investing is a long-term business venture. Therefore, consistently transacting and trading properties does not always lead to larger equity returns or growth. As a company, we provide our clients with a complete portfolio analysis on an annual basis so that they can accurately assess the next steps with their portfolio. If you have any questions about your portfolio's status or position, please contact us today for a free comprehensive analysis and discussion of the following.
Cash on Cash Analysis
The first step in understanding an investor’s portfolio position is to evaluate the portfolio's current market value, debt position, and net income. Once these elements are established, we calculate one of the most critical metrics in real estate investing: the cash-on-cash ratio. By selecting the net portfolio income and calculating that figure against the portfolio equity, we can understand how hard our client’s equity works for them. After calculating a portfolio's cash-on-cash ratio, we can recommend if an investor should consider steps to increase their return on investment or if actions are available to add greater security to the portfolio's current returns.
Estimated Portfolio Appreciation
Following the calculation of the portfolio cash-on-cash ratio, the next step in the process is to analyze the characteristics of the property’s location and construction to evaluate and estimate a future appreciation for the portfolio. Various elements can factor into property appreciation, ranging from local employment growth and property development to deferred maintenance and functional obsolescence. With our knowledge and experience of a multifamily property in Southern California, we deeply analyze each property in the portfolio to understand how these factors affect our client’s potential for portfolio growth.
Potential Trade Analysis
Factors outside of standard investment strategies can motivate investors to make decisions for their portfolios. Personal life events, such as the dissolution of partnerships, relocation of families, changes in lifestyle, etc., can all affect decision-making. As mentioned, strategic variables can also motivate investors to seek changes to their portfolios. An increase in net income, change in location, change in product type, etc., can also be reasons for a change. With our understanding of the moving parts concerning a 1031 exchange, we complete our portfolio analysis by understanding our client’s desire with their portfolio; if warranted, we prepare a multiple scenario 1031 exchange analysis for one or all of the assets in our client’s portfolios. We see this as a capstone to our portfolio analysis, allowing our clients to understand all the options available to them and how those options would affect their portfolios in terms of management, net income, appreciation, debt position, and more.
Tax and Legal Advice Disclaimer
LFA Multifamily does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on, for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction.