Excel Question:

Using the spreadsheet.Go to Redfin.com and search for a house that is for sale in a market where you have a good idea for rental rates . This identified property will serve as the "Subject Property".

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%

1. Shows a First Year Operating Projection, 10 Year Operating Projection, Sales Analysis After 10 Years and Rate of Return Analysis After 10 Yearsin the Spreadsheet.
2. 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?