APARTMENT PROJECT: ANYTOWN, USA Purchase Price: Capitalized Year 2016 NOI @ 12% Terms: All Cash. Closing on 12/31/16. Units: 50; each 1,000 square feet. Net Operating Income: Rentals Vacancy & Bad Debts Operating Expenses Net Operating Income (NOI) 2016 $ 826,500 (57,855) (311.111) $ 457,534 $1,450 per month, per unit. Increase 4% annually. Increase 3% annually. 10% of Gross Rental Assumptions: Rent - 2017 Rents for '18, 19, 20, 21, 22 Operating Expenses Vacancy & Bad Debt Purchased @ end of 2016 Sold @ end of 2021 Debt Service Cost of Sale Depreciation Expense Use Sales Cap rate of 8 374% of 2022 NOI $4,000,000, 7 year term, 10% Interest only. 5% of Sales Price. None contemplated for this problem. REQUIRED: 1. Five Year Projection. 2. What is the purchase price? A. Per Unit? B. Per Square Foot? 3. What is the sale price? A. Per Unit? B. Per Square Foot APARTMENT PROJECT: ANYTOWN. USA Requirements continued: 4. What is the Gross Rent Multiplier at: A. Purchase? B. Sale? 5. What is the Break-Even Occupancy Rate in 2017? 6. What is the Free and Clear Return in 2017? 7. What is the Cash-on-Cash Return in 2017? 8. What is the Loan to Value Ratio in 2017? 9. What is the Debt Service Coverage in 2017 and in 2021? 10. What is the Margin of Safety in 2017 and in 2021? 11. What is the Expense Ratio in 2017 and in 2021? 12. What are the Pre-Tax Sales Proceeds? 13. What is the Pre-Tax IRR? 14. If purchased All Cash, what is the IRR? Name of Entity: Mahoncy Room Rental's, LLC (A Sole Proprietorship) January 1st 150 $ 3,000,000 $ 400,000 $750,000 $325 Per Month, Per Unit 6% $240,000 Assumptions: Property Acquisition Date: # of Units: Total Property Cost: Land Portion Initial Equity Initial Average Rent: Vacancy Rate: Operating Expenses: Growth Rates: Potential Gross Income: Operating Expenses: Property Value: Holding Period in Years Mortgage Loan Amount Mortgage Interest Rate Mortgage Loan Term in Years Monthly Mortgage Payments (P&I) Annual Debt Service Depreciable Amount Depreciation Method/Years Selling Expenses (As a % of Resale Amount) Owner's Ordinary Tax Rate: Owner's Capital Gains Tax Rate: 5% 5% 5% 5 $2,250,000 10.50% 25 $21,244 s 254.929 S 2,600,000 MACRS/27.5 2.50% 31% 28% A B D E 1 F G H 1 Year 1 Year 2 Year 3 Year 4 Year 5 $ 585,000 $ 614,250 S 644,963 S 677,211 S 711,071 35, 100 36,855 38,698 40,633 42,664 $49,900 577.395 606,265 636,578 668,407 240,000 252.000 264,600 277,830 291,722 309,900 325,395 341,665 358,748 376.685 1 309,900 254.929 II $ 54.971 325,395 341,665 358,748 254.929 254.929 254,929 70,466 $ 86,736 $ 103,819 $ 376,685 254.929 121.756 I Potential Gross Income 3 Less: Vacancias 4 Effective Gross Income 5 Less: Operating Expenses 6 Net Operating Income - NOI 7 Less: Capital Expenditures 8 Cash Available For Debt Service 9 Less: Debt Service 10 Before Tax Cash Flow - BTCF 11 12 Net Operating Income - NOI 14 Less: Interest Expense 15 Depreciation Expense 16 Taxable income (Loss) 17 18 19 Before Tax Cash Flow - BTCF 20 Less: Income Taxes 21 Plus: Tax Savings 22 After Tax Cash Flow - ATCF 23 24 Net Proceeds from Sale (After Tax) 26 Plus: After Tax Cash Flow Total Cash Inflows (Outflows) 28 29 30 IRR 19.7% $ 309,900 $ 235,325 90,606 $ (16,031) 5 325,395 S 341,665 $ 358,748 S 233,164 230,767 228,102 94,545 94.545 94,545 (2,314) $ 16,353 $ 36,101 $ 376,685 225,147 94,545 56.993 III II $ 121,756 (17,668) 54,971 S N/A 4,970 59,941 S 70,466 $ 86,736 $ 103,819 $ $ N/A (5,069) (11,191) 717 NA NA 71,183 $ 81,667 $ 92,628 $ N/A IV $ 104,088 IV 59.941 S (750,000 $ 59,941 $ 71,183 81,667 71,183 $ 81,667 S $ 1,268,738 92.628 104,088 92,628 $ 1,372,826
