REAL ESTATE INVESTMENT ANALYSIS

Transcription

1 REAL ESTATE INVESTMENT ANALYSIS MARCH PREPARED BY : 8330 LBJ Frwy Suite 610B Dallas, Texas cathy@allstarhomegroup.com (214)

2 Executive Summary Authorized License to. Acquisition Costs Total $575, Acquisition Fees $15, Total $590, Financial Ratios (according to Acquisition Cost)* (after 1 year) Gross Rent Multiplier (GRM) 6.44 Net Rent Multiplier (NRM) Average Unit Price Income and Expenses Gross Op. Income $91, Increase of incomes: Year 1 $ Vacancy and Credits Effective Gross Income (EGI) $5, $85, $28, Expenses Net Operating Income $56, Debt Service $41, Cash Flow (Before Taxes) Cash Flow + Equity Payment % Internal Rate of Return (year 5) 2.00 % Annual Appreciation Before Equity % After Equity (Principal Payment) % After Equity and Appreciation % $5, $32, Distribution of the Pot. Gross Income of $91, (after 1 year) and Financing Term 9.67 % Capitalization Rate $11, Cash Flow + Eq. + Appreciation Interest Rate % Break Even Ratio $20, Appreciation Length % Debt Coverage Ratio (DCR) $15, Total of Equity (Principal Payment) Mortgage # % Loan to Value Ratio (LVR) Cash on Cash Return* Cash Flow $73, Operating Expense Ratio (OER) $75, $515, , , , , % $3, , Principal Payment Mortgage Interest Cash Flow (after Taxes) Operating Expenses + Fees Income Tax Income Loss The red and purple sections represent your portion of the potential incomes of the building after the first year of operations. This amount belongs to you because the expenses have been paid as well as the mortgage interests and taxes. * Not considering non-financed acq. fees nor fixed expenses 2

3 Financial Analysis Authorized License to. Income Monthly Annually th nd th nd nd th rd th $ $10, $ $10, $ $10, $ $11, $ $11, $ $11, $ $11, $1, $13, Potential Gross Income (PGI) $7, $91, Vacancy and Credits % of PGI Monthly Annually Vacancy Rate 5.00 % $ $4, Bad Debt 1.00 % $75.95 $ Effective Gross Income (EGI) $7, $85, Expenses % of EGI Monthly Annually Taxes % $1, Insurance 5.25 % $ Maintenance - Repairs 5.25 % $ Management 7.61 % $ $13, $4, $4, $6, Total of Expenses % $2, $28, Cash Flow Net Operating Income Annually $56, Debt Service Cash Flow (Before Taxes) Total of Equity (Principal Payment) Cash Flow + Equity Appreciation Cash Flow + Eq. + Appreciation $41, $15, $5, $20, $11, $32, Prepared for : 3

4 Financing Authorized License to. Acquisition Cost Detailed Acquisition Total $575, Acquisition Fees 2.67% 84.64% Loan Insurance Premium (3.00 %) $15, Premium Tax (5.00 %) $ (Financed) 12.70% Total Acquisition Fees Mortgage Total $15, GRAND TOTAL $590, Premium Tax Total unfinanced fees $ Loan Insurance Premium $75, (13.04 %) of Acquisition Cost Mortgage # 1 $515, (86.96 %) of Acquisition Cost Length Interest Rate Term Payment Frequency Compound Interest Payment 7.00 % Monthly Monthly $3,

5 Profitability Analysis Authorized License to. Financial Ratios (After 1 year)* Acquisition Cost Gross Rent Multiplier (GRM) Net Rent Multiplier (NRM) Average Unit Price $73, Operating Expense Ratio (OER) % Loan to Value Ratio (LVR) % Debt Coverage Ratio (DCR) 1.38 Break Even Ratio % Capitalization Rate 9.67 % Internal Rate of Return (year 5) % Cash on Cash Return Before Equity After Equity (Principal Payment) After Equity and Appreciation 20.80% 27.78% 43.11% Financial Ratios (At Year 0)* Acquisition Cost Gross Rent Multiplier (GRM) 6.71 Net Rent Multiplier (NRM) Average Unit Price $71, Capitalization Rate 9.86 % Cash on Cash Return** 240% 200% 160% 120% 80% 40% 0% % % % % % % 87.55% 88.45% 91.41% 56.57% 65.98% 42.11% 42.12% 26.78% 19.80% Year 1 Year 2 Year 3 Year 4 Year 5 This diagram represents the portion of the initial down payment that goes back in the investor's pockets throughout the years. In other words, with this diagram it is possible to identify the moment when the investor will have entirely recovered his down payment by observing the moment when 100% is reached. Cash on Cash Return (Appreciation) Cash on Cash Return (after Equity) Cash on Cash Return (before Equity) *Not considering non-financed acq. fees nor fixed expenses **Considering non-financed acquisition fees and fixed expenses. 5

6 Financial Forecast Authorized License to. From Apr 01, 2017 From Apr 01, 2018 From Apr 01, 2019 From Apr 01, 2020 From Apr 01, 2021 To Mar 31, 2018 To Mar 31, 2019 To Mar 31, 2020 To Mar 31, 2021 To Mar 31, 2022 Incomes and Expenses..... Potential Gross Income $91, $92, $94, $96, $98, Effective Gross Income $85, $87, $89, $90, $92, Operating Expenses $29, $29, $30, $30, $31, Net Operating Income $55, $57, $59, $60, $61, Debt Service $41, $41, $41, $41, $41, Cash Flow (before Taxes) $14, $16, $17, $19, $20, Financing..... Principal Payment $5, $5, $6, $6, $6, Mortgage Interest $35, $35, $35, $34, $34, Mortgage Balance $509, $504, $498, $491, $484, Profitability (Accord. to Market Value)..... Gross Rent Multiplier (GRM) Net Rent Multiplier (NRM) Operating Expenses Ratio (OER) % % % % % Loan to Value Ratio (LVR) % % % % % Debt Coverage Ratio (DCR) Break Even Ratio (BER) % % % % % Capitalization Rate (Cap. Rate) 9.54 % 9.67 % 9.67 % 9.67 % 9.67 % Market Value of Property per apartment $73, $74, $76, $77, $79, Net current Value of the Cash Flow $14, $15, $15, $16, $16, Cash on Cash Return (Before Equity) % % % % % Cash on Cash Return (After Equity) % % % % % Cash on Cash Return (Appreciation) % % % % % Equity (cumulative)..... Cash on Cash Return (Appreciation) % % % % % Property Value (Annual Appreciation 2.00%) $586, $598, $610, $622, $634, Appreciation (Accord. to Market Value) $11, $23, $35, $47, $59, Principal Payment $5, $10, $16, $23, $30, Cash Flow (after Taxes) $14, $31, $49, $68, $88, Total Equity $31, $65, $101, $139, $178,

7 Sale Price Evaluation Authorized License to. (Percentage) Desired Rate of Return (Before Taxes and Equity) 0.00 % Income Expenses Net Annual Income $85, $28, $56, Mortgage Total Mortgage Interest Rate Length Mortgage Payments $710, % months $4, Evaluation (Percentage) Debt Coverage Ratio Annual Profits $106, % 1.00 ($0.04) Sale's Price Evaluation $816,