You are to evaluate the purchase of a ten year old 16 unit apartment building located in a prime area. Asking price is $3,000,000. Please complete the Cash Flow Analysis incorporating the following data. (Market Cap Rate 4%)

A.Income

Totals

6 - Two bedroom, two bath @ $2,000 a month

$_________________

10 - One bedroom, one bath @ $1,000 a month

__________________

Adjustment to Income

- Vacancy Factor is 5%

-(____________)

+ Storage and Laundry income $300 per month

+ ______________

Effective Gross Income

$___________________

B.Operating Expenses

Resident manager is paid $1,000 per month

$____________________

Utilities are $500 per month

____________________

Maintenance average $300 per month

____________________

Gardner paid $250 per month

____________________

Trash Collection is $150 per month

____________________

Supplies average $150 per month

____________________

Real estate taxes are $30,000 annually

____________________

Annual Operating Expenses

$____________________

C.Financing and Loan Information

You will need a new loan for 50% of the purchase price of $3,000,000.

The new loan will be in the amount of $1,500,000 at 6.5% interest.

Loan to be fully amortized over 30 years.

Monthly payment (debt service) is $9481.00

Annual Debt Service including principle and interest

$____________________

CASH FLOW ANALYSISFINAL PAGE 2

Instructions: Please print your calculations clearly.

1.Gross Scheduled Rental Income

+

$

___________________

2.Vacancy and Rent Loss

-

$

___________________

3.Gross Collectible Rental Income

=

$

___________________

4.Income from Other Sources

+

$

___________________

5.Gross Operating Income

=

$

___________________

6.Annual Operating Expenses

-

$

___________________

7.Net Operating Income (NOI)

=

$

___________________

8.Annual Debt Services

-

$

___________________

9.Before Tax Cash Flow

=

$

___________________

FINAL PAGE 3

Income (NOI)

=

Rate (%)

Value

Income (NOI)

=

Value

Rate

Rate x Value

=

Income

1. Using the formula determine the property cap rate

1. Using the cap rate determine the value of the property.

1. Is the property a good value?

1. Using a market cap rate of 4% determine the property's value.

Is this a better or worse value? Explain.