In this assignment, you'll be placed in the role of lead analyst for a small real-estate investment group that specializes in home "flipping." The group scours the country for homes, apartments, and complexes that possess high resale value after renovations. The group uses a mix of its own capital and loan financing to cover initial upfront purchasing expenses, renovations, and monthly payments. At the right price and under the right conditions, these investments can be highly lucrative. However, pay too much or sell for too little, and all profits are quickly wiped away.

You've been tasked with helping the company assess which (if any) of the five properties meet the company's thresholds for investment.

Part 1a: Calibrating the Model

Using the starter file provided, determine a strategy for translating the following investment case into a financial model that can be used to calculate the total profitability of each opportunity.

Case 1: Anchorage Apartment (Test Case):

• This apartment is being sold for $225k and requires a 20% upfront deposit. There is also an additional upfront $2,500 closing fee that will need to be covered on top of the purchase price. Your investment team is willing to cover the upfront expenses using its own cash.
• For the remainder of the property purchase price, a private loan provider will be used. The loan provider is willing to offer a rate of 12.5% annual interest on a loan for the remaining sum on a monthly accrual. During the loan period, your company is willing to pay $10k per month towards its loan. The company believes it can complete renovations within 5 months of purchase.
• The company will pay for renovations out of pocket using its own cash. It expects to spend $15k on materials and supplies and another $25k in labor.
• Your team believes the property can be resold for $363k after renovations.

As this is the test case, your team has offered you the following values to help calibrate your model. Based on the information provided, the above deal should net a total profit of $86,980.22 with a profit margin of 24% (give or take a few hundred dollars).

I am not sure how to calculate the FV for this.