Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please show in excel, thank you so much Subject Property This is a Class B duplex in Gainesville that you plan to renovate before leasing
please show in excel, thank you so much
Subject Property This is a Class B duplex in Gainesville that you plan to renovate before leasing out to students in order to command higher rents. You did your research and project the renovations to cost you $6,500 per unit in year 1. You can purchase the property for $175,000 today and you believe that the total combined rent will be $1,745 a month for the entire property with a 12 month lease. You also believe that your rent will grow at a constant yearly rate of 1.5% and project that you will have vacancy and collection losses of 3% annually since you secured creditable tenants. Both tenants will be charged $50 a month for their parking spot, maintenance and utilities will cost you $4,000 annually, and the operating expenses will grow at 2% yearly, Based on your assumptions you can sell your property in 5 years for $225,000. You expect there to be selling expenses of 6%. You will not Invest in this property unless you can realize an unlevered before tax return of 10%, a levered before tax return of 14%, and a levered after tax return of 9.8%. You would like to acquire the property with 60% financed by ABC Bank with a 15-year fixed interest rate loan at 3.5% per year. You also negotiate to only pay interest for the six months. You will have to pay 3% in loan expenses and you plan on using an amortization term of 30 years making this a fixed rate partially amortized loan with an interest only period. Your yearly taxes will be $3,750 and you will have taxes due on sale of 4% on the property, Discounted Cash Flow Assumptions Monthly Rent Per Unit Number of Units Rent Growth [YEARLY Vacancy/Collection Losses Miscellaneous Income Per Month OpX (VEARLY 1 Opx Growth (YEARLY 2 CapX Purchase Price (YEAR O) Sale Price (YEAR) Selling Expense Required Return (RR) Unlevered Before Tax 7 Required Return (RR) Levered Before Tax Required Return (RR) Lavered After Tax 9 Annual Taxes Taxes Due On Sale om 1 -2 Proforma YR 1 YR 2 YR 3 YR 4 YR5 VR6 5. Potential Gross income 6. Vacancy and Collection Miscellaneous Income Effective Gross income Opx 50 Capx 1 Net Operating Income 22 Debt Service 13 Before Tax Cash Flow 54 Tax 5 After Tax Cash Flow 36 17 38 Acquisition Price 0 Loan Amount Loan Expenses Equity Investment 4 Initial Equity Investment 15 6 Sale Price 7 Supenses Net Sales Proceeds Cash Flow From Sale Of A Property Net Sales Proceeds Remaining Morte Balance Before Tax Equity Reversion Befo Tam ARE A. LA T en Ch from Sol Art Ne Sales Proces Anne Bare Taste Town Ar Torque version YRE Cash From Berators VRB YR YRS New Balartes Leerdere Arte NY IH Unlevered for Before WART Ground Cap Bate D E Payments 1 Amortization Table 2 3 4 Assumptions 5 Loan Amount (0%) 6 Loan Expenses (.0%) 7 Loan Term 8 Amortization Term 9. Interest Only Period 10 Rate 11 12 13 14 Month Beginning Balance 15 16 PMT VO PMT Amortization Table Monthly Payment Principal Interest Ending Balance 18 19 20 SODAS****SUBOKUSU NESEBB 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 42 43 44 45 46 47 48 Subject Property This is a Class B duplex in Gainesville that you plan to renovate before leasing out to students in order to command higher rents. You did your research and project the renovations to cost you $6,500 per unit in year 1. You can purchase the property for $175,000 today and you believe that the total combined rent will be $1,745 a month for the entire property with a 12 month lease. You also believe that your rent will grow at a constant yearly rate of 1.5% and project that you will have vacancy and collection losses of 3% annually since you secured creditable tenants. Both tenants will be charged $50 a month for their parking spot, maintenance and utilities will cost you $4,000 annually, and the operating expenses will grow at 2% yearly, Based on your assumptions you can sell your property in 5 years for $225,000. You expect there to be selling expenses of 6%. You will not Invest in this property unless you can realize an unlevered before tax return of 10%, a levered before tax return of 14%, and a levered after tax return of 9.8%. You would like to acquire the property with 60% financed by ABC Bank with a 15-year fixed interest rate loan at 3.5% per year. You also negotiate to only pay interest for the six months. You will have to pay 3% in loan expenses and you plan on using an amortization term of 30 years making this a fixed rate partially amortized loan with an interest only period. Your yearly taxes will be $3,750 and you will have taxes due on sale of 4% on the property, Discounted Cash Flow Assumptions Monthly Rent Per Unit Number of Units Rent Growth [YEARLY Vacancy/Collection Losses Miscellaneous Income Per Month OpX (VEARLY 1 Opx Growth (YEARLY 2 CapX Purchase Price (YEAR O) Sale Price (YEAR) Selling Expense Required Return (RR) Unlevered Before Tax 7 Required Return (RR) Levered Before Tax Required Return (RR) Lavered After Tax 9 Annual Taxes Taxes Due On Sale om 1 -2 Proforma YR 1 YR 2 YR 3 YR 4 YR5 VR6 5. Potential Gross income 6. Vacancy and Collection Miscellaneous Income Effective Gross income Opx 50 Capx 1 Net Operating Income 22 Debt Service 13 Before Tax Cash Flow 54 Tax 5 After Tax Cash Flow 36 17 38 Acquisition Price 0 Loan Amount Loan Expenses Equity Investment 4 Initial Equity Investment 15 6 Sale Price 7 Supenses Net Sales Proceeds Cash Flow From Sale Of A Property Net Sales Proceeds Remaining Morte Balance Before Tax Equity Reversion Befo Tam ARE A. LA T en Ch from Sol Art Ne Sales Proces Anne Bare Taste Town Ar Torque version YRE Cash From Berators VRB YR YRS New Balartes Leerdere Arte NY IH Unlevered for Before WART Ground Cap Bate D E Payments 1 Amortization Table 2 3 4 Assumptions 5 Loan Amount (0%) 6 Loan Expenses (.0%) 7 Loan Term 8 Amortization Term 9. Interest Only Period 10 Rate 11 12 13 14 Month Beginning Balance 15 16 PMT VO PMT Amortization Table Monthly Payment Principal Interest Ending Balance 18 19 20 SODAS****SUBOKUSU NESEBB 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 42 43 44 45 46 47 48 Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started