1. Should you purchase this asset? Why or why not?

PURCHASE PRICE: TERMS: BASE YEAR DATA (2013): * S24 million * S4 million in cash, the balance financed at 8 3/4% with a 25-year level payment, monthly amortization mortgage * Prepayment penalty of of balance if prepaid within the first four years REVENUE Rental Income OPERATING EXPENSES Real Estate TaxeS Labor Costs HVAC Repairs & Maintenance Hazard Insuranc Total NET OPERATING INCOME ASSUMPTIONS (for the HOLDING PERIOD) 2.743.ooo S137.150 S327.788 S181.062 S175.ooo S72.ooo S893.ooo 1.850.ooo Purchase Date: Rental Income: Operating Expenses (ALL): Depreciable Basis: Sales Dates Sales Cap Rate: Selling Costs: Marginal Tax Rate: L-T Capital Gains Tax Rate: Depreciation Recapture Tax Rate : NOTES/HINTS December 31, 2013 Increase 5.0% per annum Increase 4.0% per annum Escalation Income (DUE TO REAL ESTATE TAXES: Take 2013 Base Year expense and grow 3% per ann Overage ONLY (difference between a given year and previous year) is due to * LABOR COSTS: Take 2013 Base Year expense and grow 4% per annum Overage ONLY (difference between a given year and previous ear) is due to 80% of the Purchase Price. December 31, 2018 (Sales Proceeds are received 12/31/18) 9.5% (Using 2019 NOI) 8.0% of Selling Price (Includes Commissions) (USE THIS RATE FOR THIS CASE) * In any operational years where a "Taxable Loss" is encountered, the calculation for the TAX (now called TAX SAVINGS) should be treated as a TAX REFUND, and "taken in" during the same tax year as the loss. * If you perform your analysis correctly, you should encounter taxables losses for 2 years of your investment period.