Along with the purchase price and estimated rental rates, please use the following assumptions for the purposes of your analysis:

Closing costs = 1% of purchase price

Interest Rate = 4%, 80% LTV, 30yr fully amortized

Home Price Appreciation = 5%

Annual Rent Increase = 4%

Homeowners Insurance = $1,000/yr (increases 4% each year)

Property Taxes = 1.2% of purchase price (increases 2% each year)

Water, Sewer, Garbage = $80/mo (increases 5% each year)

Annual Maintenance = $2,000 (increases 4% each year)

Depreciation: Tax Life = 27.5 years

Depreciation: Building = 80% of Total House Price

Marginal Tax Bracket = 40%

Capital Gains Tax Rate = 25%

A.Make sure your spreadsheet shows a First Year Operating Projection, 10 Year Operating Projection, Sales Analysis After 10 Years and Rate of Return Analysis After 10 Years

B.Once you have completed your spreadsheet and have found your IRR, play around with the variables for Appreciation, Annual Rent Increase and Interest Rate on the loan. Changing each of these variables up or down by 1%, which one makes the biggest impact on IRR?