You are considering the purchase of an apartment complex.
The following assumptions are made:
The purchase price is $2,000,000
There are 30 units and the market rent is $850/month
Market rents are expected to increase 4% per year
Vacancy and collection loss is 10%
Real Estate Taxes are expected to be $20,000 in year 1 and increase 5% per year
Insurance is expected to be $10,000 in year 1 and increase 7% per year
Utilities are expected to be 9% of EGI each year
Repairs and Maintenance costs are expected to be 7% of EGI each year
Grounds and Security costs are expected to by 6% of EGI each year
The market value of the investment is expected to increase 6% each year
Selling expenses will be 5%
The holding period is 5 years
80% of the purchase price can be borrowed on a 30-year, monthly payment mortgage
The annual interest rate on the loan will be 8%.
Loan origination fees will be 1% of the loan amount (paid in the year the loan is taken out - Year 0)
There are no prepayment penalties if you pay the loan early.
Tenant Improvements are expected to be $3,000/year
Leasing Commissions are expected to be $1,000/year
A roof repair totaling $15,000 will be completed in year 3
The required rate of return for the investor is 12%.
Assume taxes are 30% of BTCF.
Assignment:
Fill out the income statement.
Calculate the monthly mortgage payment to find debt service.
What is the IRR and NPV of the property? (CF0 = equity investment + loan origination fees)
Calculate the ratios for one or five years as indicated on the worksheet
To find the mortgage balance, principal and interest payments:
	Enter key strokes to find payment on the loan
	Enter 2nd Amort
	P1 = 1 enter, down arrow
	P2 = 12 enter, down arrow
	Balance of loan, principal and interest is displayed
	For year 2,
	P1 - 13 enter, down arrow
	P2 = 24 enter, down arrow
	Balance of loan, principal and interest is displayed