Residential Apartment Building 138 units

Apartment Breakdown Monthly Rent

(36) Studios	$ 750.00
(48) 1 Bedrooms	1,500.00
(42) 2 Bedrooms	2,200.00
(12) 3 Bedrooms	2,700.00

Closing Costs: 2.5% of Purchase Price

Vacancy: 3% of Gross Potential Rent

Loan Constant: 6.5%

Ordinary Income Tax Rate: 28%

Capital Improvements:	$ 213,000
Real Estate Taxes	187,000
Insurance	73,000
Annual Debt Service	1,337,213
Payroll and Payroll Taxes	185,000
Union Benefits	37,500
Utilities	78,000
Repairs	150,000
Supplies	30,000
Legal and Accounting	25,000

1. What is the Gross Potential Rent Income?
2. If the property were purchased at a 7% capitalization rate, what is the Purchase Price?
3. What is the Net Rent?
4. If the depreciable basis of the property is based on 80% of the purchase price, what is the annual depreciation?
5. What is the Vacancy Allowance?
6. What are the Operating Expenses?
7. What is the Net Operating Income?
8. What is the Net Income?
9. If the property had originally been purchased at a capitalization rate of 6% versus 7%, what would the difference in the purchase price be?
10. What are the closing costs?
11. What is the Mortgage amount?
12. How much equity is invested in the property?
13. What is the LTV?
14. What is the cash-on-cash return (after debt service) on this investment?
15. Assume the new owner believes that they could increase the Gross Potential Rent Income in the first year by 2%, at the original capitalization rate, how much increase in value would the owner realize?
16. Using the information obtained in question #15, what would the new cash-on-cash return be?
17. Beginning in year 2, based upon question #15, assuming rents increase 5% per year; expenses increase 3% per year; vacancy remains 3% of Gross Potential Rent, what would the property sell for at a capitalization rate of 6% at the end of year 4?
18. Using the information obtained in question #15 above, how much debt (at the end of year 1) could be obtained on the property assuming a debt coverage ratio of 1.3 and a loan constant of 7.5%?
19. Using the information obtained in question #17 above, if the owners decided to sell the property at the end of year 4, how much gain or loss would they realize versus their original purchase price?
20. Using the information obtained in question #17 above, what is the net income for years 2, 3 and 4?