The Omni/Cost Estimate
This page is about trying to find a reasonable total monthly cost estimate for the Omni. Briefly, there are two options on the table, with the latter being the more likely:
- Getting a mortgage and buying the Omni.
- It looks like getting a business mortgage will take a 30 to 50 percent down-payment.
- Even if we can find that money, we will probably need to have someone with a great credit rating co-sign the mortgage, since our newly started organization probably can't get a mortgage like that.
- Renting the Omni with an option to buy in two years at a predetermined price.
- This would require between $26,000 and $100,000 in deposit and $13,000 a month triple-net.
The total cost of the Omni is about $1.9 million
Renting triple-net (nnn) vs. industrial gross (IG)
When an industrial gross price is specified for a property, it means that the following are taken care of by the owner:
- Property and building tax
- Building and fire insurance
- Building repair/maintenance
- Ensuring that everything in the building is up to code for the current use
With triple-net all that is something we have to take care of ourselves. This means that a triple-net price is n
The property taxes are based on the most recent assessment of the property and building value. California's Prop 13 means that re-assessments only happen when a building/property is sold. This means that the taxes we'd have to pay will be much higher if/when we buy compared to when we rent.
This section has some info on the current assessment gathered from acgov.org
The parcel number is 13-1161-1.
- Land value: $140,492
- Improvements: $180,048
- Exemptions: $7,000
- Total taxable value: $320,540
Use code is 6800 which means "Lodgehall and/or clubhouse".
Previous property tax by year:
- 2013-2014: $7,147.50
- 2012-2013: $6,880.50
- 2011-2012: $6,919.58
Those values are based on a total taxable value of $320,540. If the property is sold, then the value is re-assessed at market value. Which could be $1,900,000 or it could be more. Basically whatever the Alameda County assessor thinks is "market value".
The property tax is calculated like so:
- Fixed charges: $2,631.60
- 1.4403% of assesed value: $4,515.90
- Total: $7,147.50
If we do the same for $1.9 million price then:
- Fixed charges: $2,631.60
- 1.4403% of assesed value: $27,365.70
- Total: $29997.3
That's about $2500 a month just for tax if we buy, vs. about $600 if we rent.
There is also something called "Supplementary property tax". I'm not sure how that works.
Source: You can look up the tax history here using the parcel number.
Using this calculator, with $1.9 million as the property value, credit rating "good", loan amount $1.52 million (indicating a 20% down payment), a 5% fixed interest rate and a loan term of 30 years, the monthly payment is $10,440. If we change it to a mortgage rate of 4.125% (seems more realistic. found via zillow) then the monthly payment is $9,647. These payments include the 1.4403% property tax.
We should add the yearly fixed charges of $2,632 to these monthly rates, so that becomes:
- 30 year, 5%, 20% down: $10,660 per month
- 30 year, 4.125%, 20% down: $9,867 per month
Note: According to David's research the down-payment would be more like 30 to 50 percent. This would not change the monthly much, since the APR on the down-payment loan and the APR on the mortgage will likely be similar, but it _does_ make it more difficult to raise the money
Paying off down-payment
The down-payment of $380,000 will be paid by certain moneyed individuals. This may be in the form of a loan or an investment. Either way they will probably have to be paid back with some return on their loan/investment, since the community probably wants full ownership of the property in the long term.
Let's assume that the return for these lenders/investors is a reasonable 5% annual percentage rate.
- Paid back in 30 years: $2,040 per month
- Paid back in 20 years: $2,508 per month
- Paid back in 10 years: $4,030 per month
- Paid back in 5 years: $7,171 per month
If the APR is 4% instead:
- Paid back in 30 years: $1,814 per month
- Paid back in 20 years: $2,302 per month
- Paid back in 10 years: $3,847 per month
- Paid back in 5 years: $6,998 per month
Let's assume 5% APR over 20 years. Total monthly is now:
- 4.125% mortgage, down-payment at 5% over 20 years: $12,375 per month
If we rent, then the rent is $13,000 a month triple-net.
The tax for 2013-2014 is $7,147.50 which would not change if we rent, so:
- Rent + tax is ~$13600
Paying off deposit
If we rent, then we'll need to raise a deposit of about $50,000. We need to get a definite number from the owner. We should raise this in the form of long-term loans from the community. I don't think we need to add an APR to this (Juul (talk)) but we can if we need to. Let's say we aim to pay back the deposit over five years.
- Rent + tax + payments for $50,000 deposit: ~$14,433
We need some kind of building + fire insurance. The current owner has a $2.2 million fire and building insurance that costs $6000 a year. That seems low. We need to research more, but let's assume we have to pay $1000 a month for insurance on the building. That may still be too low or it may be too high. We _really_ need to do research on this.
Adding the insurance on top of the tax and payments:
- 4.125% mortgage, 5% down-payment, building insurance: $13,375 per month
- Renting with $50,000 deposit: ~$15,433
We also need liability insurance, but it is probably enough for each individual group to get liability insurance that suits their needs, and it will vary based on the group's activities.
On top of mortgage payments come utilities. I have no idea what they'd be, but let's assume $2,000 for no good reason.
- 4.125% mortgage + insurance + utilities: $15,375 per month
- Renting with $50,000 deposit: ~$17,433
Renovations and requirements
What needs to be done / fixed up in order for the building to become safe for our purposes? Here are a list of possibles:
- Emergency exits
- Emergency lighting
- Sound proofing
- Sprinkler system (do we need this?)
- ADA compliance (no elevator to basement or 1st floor).
More research is needed.
Total monthly expense
If we haven't missed any big expenses in these calculations, and assuming we need no improvements/renovations (doubtful) then the total monthly expense will be around $15,000 per month if we buy or $17,000 a month if we lease. This may be a somewhat high estimate. If the insurance is truly only $500 a month and the utilities are only $1,500 a month, then we're down to $14,000 or $16,000 a month.
This may seem like a lot, but square footage wise it's not bad.
I think the building has about 25,000 usable square feet of space. If that's true then we have to make at least:
- If monthly is 14,000: $0.56 per sqft
- If monthly is 15,000: $0.60 per sqft
- If monthly is 16,000: $0.64 per sqft
- If monthly is 17,000: $0.68 per sqft
Even with the condition of the building and the limitations (very little light in basement, huge rooms that are hard to divide) these square footage prices are _amazing_ for the area.
Total monthly income
The four groups sudo room, CCL, timeless, infinite light and BAPS may be able to bring in upwards of $6500, but that's probably stretching it (at least until they have some time to grow).
The HUB in Oakland managed to raise $142,719 of their $100,000 goal via a kickstarter campaign over a one month period (which is pretty crazy). Maybe our groups together could raise $150,000 over 4-6 months.
The crowdfunded money should be used on:
- Improving the building (especially getting it up to code)
- Buffer for rent shortage