CASE STUDY: You intend to purchase a duplex for $200,000 and obtain an 80% loan at 5% interst for 30 years. The lender wants to examine the purchase in order to determine the amount of one year cash flow; either positive or negative. The lenders appraiser is assigned to completing the operating statement for the lender:

FACTS:

Annual Income: Both units are currently rented for $1,400 per month. The appraiser expects 8% vacancy/rent loss for the year.

Annual Expenses: The tenants are responsible for all utilities. However, the appraiser has included $300 for pest control and $500 for landscape maintenance. Interior expense is projected to be $1,000 total and general maintenance is projected to be $1,000. Other investors are paying 5% of EGI annually for management expense. Supply expense is estimated to be $200.

The units were recently remodeled with new roof and flooring, new AC units and furnaces as well as new water heaters. The kitchen appliances are ten years old with an expected remaining life of ten years. The cost new of the appliances are: stove/range $700, refrigerator $800 and dishwasher $400.

Monthly housing expense (PITI) includes the principle and interest on the proposed loan________________________, $800 annual hazard insurance/12 months and $4,500 annual property taxes/12 months.

What is the net monthly cash flow reported to the lender?