1) What is year one and five cash on cash returns?

IC.JJITUL LUUUTZULU You have been asked to help a client, Mr. Big Bucks, analyze a property he wants to buy in Fairfield, CT. He has a target yield of 12.0%. He is not sure if the property meets his targeted after-tax goal. He also asked that other measures of return be met. He also wants some demographic data to support his purchase. In particular what % of households rent. Following is the property data. The property is a 60-unit apartment building. It has 30 one-bedroom units and 30 two-bedroom units. One-bedroom units rent at market for $1,000 per month and two-bedroom units at $1,200 per month, Utilities included. The building measures about 45,000 square feet on three floors. Rent is anticipated to escalate at 3.25% per year, other income at 2.0% per year and expenses at the inflation rate of 2.25% per annum. The building has a laundry room. The owner has a contract with a laundry service that pays $15.00 per month per occupied unit. Vacancy is currently at 7.0% and is anticipated to remain the same over the holding period. He has anticipated the following expenses: Real estate taxes at $1,200 per unit, total Personal property taxes of $5,000, Property insurance at $275 per unit. Management is anticipated to be 5.0% of Gross operating Income. Expenses are estimated to be: Electric $72.000. Water $15,000 (Sprinkler & Units), Gas for the common areas and laundry room water heater $20,000. In addition, legal and accounting is about $15,000 per year, Licenses and permits $773, Advertising is averaging $1,500 per month, Supplies about $0.14 per square foot and repairs & maintenance $0.17per square foot. Leases are 1-year terms. Service contacts in place are: Ground care $2,000 per month, Elevator $2,000 per calendar quarter and HVAC for the heat/AC units of $3,500 per quarter. Property Assessment by the municipality is $6,250,000 with land valued at $1,250,000. Financing is available from Midnight Lenders at 4.75% for 20 years with monthly payments at a 1:1.25 Debt Coverage Ratio. Loan term is five years. The lender will lend either at the DCR or loan to value ratio (LTV) of 70% whichever loan PV is lower. In either event, the lender will charge one point of the loan amount. The buyer performed a structural integrity report for $3,500 and an appraisal and environmental report for $7,500 each. Mr. Big Bucks is in the 22% Federal ordinary tax bracket and state tax rate of 5.5%. His Capital Gain Tax Rate is $20% Federal and 6.99% for state. Recapture tax is 25%. He anticipates a purchase in January of the acquisition year at an acquisition cap rate of 7.25% and sale cap rate of 7.5%. He anticipates selling the property in December of the sale year. He estimates sales cost of 5.5%. He anticipates a Five-year holding period. IC.JJITUL LUUUTZULU You have been asked to help a client, Mr. Big Bucks, analyze a property he wants to buy in Fairfield, CT. He has a target yield of 12.0%. He is not sure if the property meets his targeted after-tax goal. He also asked that other measures of return be met. He also wants some demographic data to support his purchase. In particular what % of households rent. Following is the property data. The property is a 60-unit apartment building. It has 30 one-bedroom units and 30 two-bedroom units. One-bedroom units rent at market for $1,000 per month and two-bedroom units at $1,200 per month, Utilities included. The building measures about 45,000 square feet on three floors. Rent is anticipated to escalate at 3.25% per year, other income at 2.0% per year and expenses at the inflation rate of 2.25% per annum. The building has a laundry room. The owner has a contract with a laundry service that pays $15.00 per month per occupied unit. Vacancy is currently at 7.0% and is anticipated to remain the same over the holding period. He has anticipated the following expenses: Real estate taxes at $1,200 per unit, total Personal property taxes of $5,000, Property insurance at $275 per unit. Management is anticipated to be 5.0% of Gross operating Income. Expenses are estimated to be: Electric $72.000. Water $15,000 (Sprinkler & Units), Gas for the common areas and laundry room water heater $20,000. In addition, legal and accounting is about $15,000 per year, Licenses and permits $773, Advertising is averaging $1,500 per month, Supplies about $0.14 per square foot and repairs & maintenance $0.17per square foot. Leases are 1-year terms. Service contacts in place are: Ground care $2,000 per month, Elevator $2,000 per calendar quarter and HVAC for the heat/AC units of $3,500 per quarter. Property Assessment by the municipality is $6,250,000 with land valued at $1,250,000. Financing is available from Midnight Lenders at 4.75% for 20 years with monthly payments at a 1:1.25 Debt Coverage Ratio. Loan term is five years. The lender will lend either at the DCR or loan to value ratio (LTV) of 70% whichever loan PV is lower. In either event, the lender will charge one point of the loan amount. The buyer performed a structural integrity report for $3,500 and an appraisal and environmental report for $7,500 each. Mr. Big Bucks is in the 22% Federal ordinary tax bracket and state tax rate of 5.5%. His Capital Gain Tax Rate is $20% Federal and 6.99% for state. Recapture tax is 25%. He anticipates a purchase in January of the acquisition year at an acquisition cap rate of 7.25% and sale cap rate of 7.5%. He anticipates selling the property in December of the sale year. He estimates sales cost of 5.5%. He anticipates a Five-year holding period