1. Describe what you perceive to be the pros and cons of this deal from a qualitative perspective.
Pros: There’re several obvious advantages of this deal, including:
Superior location: This apartment is located on Dickens Street, one block South of Ventura Boulevard. The convenient transportation with easy access to 405 and 101 Freeways makes it an ideal place to live in for those who work in the major employment centers such as Burbank, Hollywood and Beverly Hills. Moreover, it provides the tenants with abundant necessities like shopping centers and restaurants.
Well-designed with high quality construction: The apartment has excellent unit mix of Studio, 1 bd/1 ba, 2 bd/1 ba, and 3 ba/2 ba. With the combination of different kinds of units, the apartment better meets the potential tenants’ need and will lead to an easier tenants bring-in and suffer less volatility in future. Also, the well maintained Courtyard with swimming pool and outdoor eating area provides a nice environment. What’s more, the new copper pluming system, vaulted ceiling, central air and heat system add value to this apartment and differentiate it from other potential deals.
Potential high capital gain: Due to low historic interest rates and a growing population, price of the area’s single family and condominium went through a continuous rise in recent years. This not only widen the rent/own affordability gap which may result in lower vacancy rate, but also provides the possibility of an extra capital gain upon sales of the apartment comparative with other deals in different cities and areas.
Low interest rate and benefits from leverage: the relative low interest rate (< Cap rate) will provide a positive operating leverage, which enlarge the ROE and less the burden of initial capital investment.

Cons: with the appealing characteristics listed above, there’re certain disadvantages that