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Posted on Jul 24, 2024

Assume: $200,000 is invested in rental property Assume: $200,000 single family homes are purchased Assume: $33,333 down payment per house ...... So you could buy

Assume: $200,000 is invested in rental property Assume: $200,000 single family homes are purchased Assume: $33,333 down payment per house ...... So you could buy 6, $200,000 homes for the $200,000 ($33,333 down payment x 6 $200,000) ....So you would be borrowing $1,000,000 ($200,000-$33,333) x 6 homes $1,000,000 debt Assume 30 year loans, and an APR of 6% on $1,000,000 (PV-1,000,000 n-360 i/y- 5 compute PMT) Amortization Schedule Payment Date Payment Principal Interest Total Interest Balance Jul 2019 $5,995.51 $995.51 $5,000.00 $5,000.00 $999,004.49 Aug 2019 $5,995.51 $1,000.48 $4,995.02 $9,995.02 $998,004.01 Sep 2019 $5,995.51 $1,005.49 $4,990.02 $14,985.04 $996,998.53 Oct 2019 $5,995.51 $1,010.51 $4.984.99 $19,970.04 $995,988.01 Nov 2019 $5,995.51 $1,015.57 $4,979.94 $24.949.98 $994,972.45 Dec 2019 $5,995.51 $1,020.64 $4,974.86 $29,924.84 $993,951.81 Jan 2020 $5,995.51 $1,025.75 $4,969.76 $34,894.60 $992,926.06 Feb 2020 $5,995.51 $1,030.87 $4,964.63 $39,859.23 $991,895.18 Mar 2020 $5,995.51 $1,036.03 $4,959.48 $44.818.70 $990,859.16 Apr 2020 $5,995.51 $1,041.21 $4,954.30 $49,773.00 $989,817.95 May 2020 $5,995.51 $1,046.42 $4.949.09 $54,722.09 $988,771.53 Jun 2020 $5,995.51 $1,051.65 $4,943.86 $59.665.95 $987,719.88 So we see that the monthly payment on $1mm loan is $5995.51/month, or $71,946.12 per year. The interest expense for year 1 would be $59,665.95 for the year Assume NO PMI expense........Assume a 20% tax rate on rental income Assume $2,000 per house per month is the amount of rent Assume 10% of rent is uncollected Assume 1.5% property tax rate Assume the properties are depreciated at a straight line 27.5 year depreciation schedule Assume 1.5% of the purchase price per year for upkeep/maintenance/appliance expense/administrative expense 1. Based on the assumptions given, construct an income statement and cash flow statement for the first year. Comoria (ESB2.000.000 d e lei sa teorolniot i ning in Sisam eee 00 000 e 00 000, recepteege SODE SO 280.0 See N NOOD ees. So e to 13 13 S ee Beach 180,13 Tage 2. Down the road, what factors are relevant? Appreciation of the value of the property? Recaptured deprecation? Closing costs and real estate fees to sell the properties? Reliability of the renters to make the payments? Other factors? explain Assume: $200,000 is invested in rental property Assume: $200,000 single family homes are purchased Assume: $33,333 down payment per house ...... So you could buy 6, $200,000 homes for the $200,000 ($33,333 down payment x 6 $200,000) ....So you would be borrowing $1,000,000 ($200,000-$33,333) x 6 homes $1,000,000 debt Assume 30 year loans, and an APR of 6% on $1,000,000 (PV-1,000,000 n-360 i/y- 5 compute PMT) Amortization Schedule Payment Date Payment Principal Interest Total Interest Balance Jul 2019 $5,995.51 $995.51 $5,000.00 $5,000.00 $999,004.49 Aug 2019 $5,995.51 $1,000.48 $4,995.02 $9,995.02 $998,004.01 Sep 2019 $5,995.51 $1,005.49 $4,990.02 $14,985.04 $996,998.53 Oct 2019 $5,995.51 $1,010.51 $4.984.99 $19,970.04 $995,988.01 Nov 2019 $5,995.51 $1,015.57 $4,979.94 $24.949.98 $994,972.45 Dec 2019 $5,995.51 $1,020.64 $4,974.86 $29,924.84 $993,951.81 Jan 2020 $5,995.51 $1,025.75 $4,969.76 $34,894.60 $992,926.06 Feb 2020 $5,995.51 $1,030.87 $4,964.63 $39,859.23 $991,895.18 Mar 2020 $5,995.51 $1,036.03 $4,959.48 $44.818.70 $990,859.16 Apr 2020 $5,995.51 $1,041.21 $4,954.30 $49,773.00 $989,817.95 May 2020 $5,995.51 $1,046.42 $4.949.09 $54,722.09 $988,771.53 Jun 2020 $5,995.51 $1,051.65 $4,943.86 $59.665.95 $987,719.88 So we see that the monthly payment on $1mm loan is $5995.51/month, or $71,946.12 per year. The interest expense for year 1 would be $59,665.95 for the year Assume NO PMI expense........Assume a 20% tax rate on rental income Assume $2,000 per house per month is the amount of rent Assume 10% of rent is uncollected Assume 1.5% property tax rate Assume the properties are depreciated at a straight line 27.5 year depreciation schedule Assume 1.5% of the purchase price per year for upkeep/maintenance/appliance expense/administrative expense 1. Based on the assumptions given, construct an income statement and cash flow statement for the first year. Comoria (ESB2.000.000 d e lei sa teorolniot i ning in Sisam eee 00 000 e 00 000, recepteege SODE SO 280.0 See N NOOD ees. So e to 13 13 S ee Beach 180,13 Tage 2. Down the road, what factors are relevant? Appreciation of the value of the property? Recaptured deprecation? Closing costs and real estate fees to sell the properties? Reliability of the renters to make the payments? Other factors? explain