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We have a property near UNT "under contract/option to buy" for 60 days at $400,000contract price, which is market value in a HOT market. The bank will lend us $320,000 to buy the property. Details of the transaction and investment we will consider buying during the "contract/option penodas ollows: (Work rates 1-9 and also diagram #10 and #11 rates of return) Wo The Boarding House is almost new! 1. Assume instant rent (or preleased) at $3,600/month total to an excellent tenant with stable income and credit, and co-signed lease by UNT student parents. 2. We will own it and they will rent it for three (3) years... then we will sell it. 3. Rent increases (in the lease) at 10%pervearforthethreeverb 4. The property increases 10% per year in value. Toyota is coming! Calculate gross resale value by compounding, the acquisition price increasing 10% per year. 5. Expenses will stay flat for 3 years. 6. Vacancy will be assumed at 10% each year for risk reduction. 7. Expenses for the property per year are as follows: i) Property management fees and repairs are $20,000/year Property taxes and insurance are 4% per year total of the acquisition price and stay flat for 3 years. ii) 8. T he 30-year mortgage (80% of value) on an investment loan at 5% annual payments that has a loan constant of.065051. 9, Our IRS Tax rate is 35% for each of 3 years (No tax rate change) 10. The land is 20% of cost and depreciation on a bricks and sticks is 27.5 years.(we buy it on January 1, 2018). 11. The resale price requires 7% expense resale transaction costs. Reinvestment rate and sale rate-496. 12. Complete an amortization chart to calculate year of sale loan payoff. 13. Complete, show all word on rates 1-9 and diagram #10 and # 1 1 unless you can also work it after +5 points. Show work on exam: I. Calculate the #9 rates of return and diagram #10 and #11! II. Discus picture! The reinvestment or "SAFE" rate on #11 is 4%/year. s: Is this a reasonable or good deal? If all data becomes facts... Is this a Draw me a reasonable investment? If not, why not? Be specific. I. Acebunting Rate of Return Minus: Equals: Divided by: Equals: Divided by Equals: Total Benefits Investment Net $ Return #years owned Average S Retu Investment yrs ". Total benefits which is net spendable income and net sales proceeds minus debt balance Future Benefits: S-year Projection CASH now ANALYSS. -1 Yer i Lest Orensinr Erenees Net Spendable Ineane Tata Annual Benefts Tal Payment Princigal Year 1 Year 2 Year 3 ohn S Baen and Dolf de Roos, 2003 320 We have a property near UNT "under contract/option to buy" for 60 days at $400,000contract price, which is market value in a HOT market. The bank will lend us $320,000 to buy the property. Details of the transaction and investment we will consider buying during the "contract/option penodas ollows: (Work rates 1-9 and also diagram #10 and #11 rates of return) Wo The Boarding House is almost new! 1. Assume instant rent (or preleased) at $3,600/month total to an excellent tenant with stable income and credit, and co-signed lease by UNT student parents. 2. We will own it and they will rent it for three (3) years... then we will sell it. 3. Rent increases (in the lease) at 10%pervearforthethreeverb 4. The property increases 10% per year in value. Toyota is coming! Calculate gross resale value by compounding, the acquisition price increasing 10% per year. 5. Expenses will stay flat for 3 years. 6. Vacancy will be assumed at 10% each year for risk reduction. 7. Expenses for the property per year are as follows: i) Property management fees and repairs are $20,000/year Property taxes and insurance are 4% per year total of the acquisition price and stay flat for 3 years. ii) 8. T he 30-year mortgage (80% of value) on an investment loan at 5% annual payments that has a loan constant of.065051. 9, Our IRS Tax rate is 35% for each of 3 years (No tax rate change) 10. The land is 20% of cost and depreciation on a bricks and sticks is 27.5 years.(we buy it on January 1, 2018). 11. The resale price requires 7% expense resale transaction costs. Reinvestment rate and sale rate-496. 12. Complete an amortization chart to calculate year of sale loan payoff. 13. Complete, show all word on rates 1-9 and diagram #10 and # 1 1 unless you can also work it after +5 points. Show work on exam: I. Calculate the #9 rates of return and diagram #10 and #11! II. Discus picture! The reinvestment or "SAFE" rate on #11 is 4%/year. s: Is this a reasonable or good deal? If all data becomes facts... Is this a Draw me a reasonable investment? If not, why not? Be specific. I. Acebunting Rate of Return Minus: Equals: Divided by: Equals: Divided by Equals: Total Benefits Investment Net $ Return #years owned Average S Retu Investment yrs ". Total benefits which is net spendable income and net sales proceeds minus debt balance Future Benefits: S-year Projection CASH now ANALYSS. -1 Yer i Lest Orensinr Erenees Net Spendable Ineane Tata Annual Benefts Tal Payment Princigal Year 1 Year 2 Year 3 ohn S Baen and Dolf de Roos, 2003 320
