FIN 3433 Example Rental Proforma - PDF

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					FIN 3433: Example Rental Proforma
Input Data                                              Gross Montly Rent               1300              Mortgage LTV                75%
Purchase Price                     150000               Growth Rate in Rent             3.0%              Term (Years)                  30
Acquisition Costs                    1000               Vacancy Rate                   10.0%              Rate                     5.875%
Land Value (BCAD)                   30000               Property Taxes                  3860              Points                     2.0%
Going Out Cap Rate                  5.50%               Other Operating Exp             2250              Prepay Penalty (%)         0.0%
Selling Expense                        7%               Growth Rate in Exp              3.0%              Equity Hurdle Rate         8.0%
Depreciation Period                   27.5              Marginal Tax Bracket           28.0%              Mortgage Amount         112,500
Initial Depr Basis                 121000               Depn Recovery Rate              25%               Monthly Pmt              665.48
Annual Depreciation                  4400               Capital Gain Rate               15%               Balance 60 Mo        104,523.12
                                                                                                          Prepay Penalty ($)            0
                                Before Tax Cash Flows by Year
                                         0            1        2            3              4          5
Operations                                          -56      182          427            680        940
Capital                            -40,750                                                       50,923
Total CF                           -40,750          -56      182          427            680     51,862
Before Tax IRR =                      5.5%
Before Tax NPV =                    -4,510
Debt Coverage Ratio                                0.99     1.02          1.05           1.09      1.12
Cash on Cash Return                             -0.14%    0.45%         1.05%          1.67%     2.31%

                                After Tax Cash Flows by Year
                                          0          1         2            3               4         5
Operations                                         766       964        1,115           1,270     1,903
Capital                             -40,750                                                      44,848
Total CF                            -40,750        766       964        1,115           1,270    46,750
After Tax IRR =                        4.7%
After Tax NPV =                      -5,578                                                               Going In Cap Rate         5.29%
                                                                                                          Going Out Cap Rate        5.50%
Cash Flow From Operations                0          1           2           3             4           5            6
Gross Rent                                     15,600      16,068      16,550        17,047      17,558      18,085
- Vacancy                                       1,560       1,607       1,655         1,705       1,756       1,808
+ Other Income                                      0           0           0             0           0            0
= Effective Gross Income                       14,040      15,444      16,988        18,687      20,556      22,612
- Operating Expense                             6,110       6,293       6,482         6,677       6,877       7,083
= Net Operating Income                          7,930       8,168       8,413         8,665       8,925       9,193
- Mortgage Payment                              7,986       7,986       7,986         7,986       7,986
= Before Tax Cash Flow                            -56         182         427           680         940
- Taxes                                          -821        -782        -688          -591        -963
= After Tax Cash Flow                             766         964       1,115         1,270       1,903

Income Taxes From Operations
End of Year Loan Balance           112,500    111,086     109,587     107,997       106,311     104,523
 NOI                                            7,930       8,168       8,413         8,665       8,925
 - Interest Paid                                6,572       6,486       6,396         6,300       6,198
 - Amortized Finance Costs                         75          75          75            75       1,950
 - Depreciation                                 4,217       4,400       4,400         4,400       4,217
 = Taxable Income                              -2,933      -2,793      -2,458        -2,110      -3,440
   Taxes Due                                     -821        -782        -688          -591        -963

Cash flow From Resale               EOY 5                           Gain on Sale
Estimated Sales Price              167,146                          Net Sales Price             155,446
- Sales Expense                     11,700                          - Adjusted Basis            129,367
= Net Sales Price                  155,446                          = Gain on Sale               26,079
- Mortgage Payoff                  104,523
= Before Tax Equity Reversion       50,923                          Depn Recovery                21,633
- Taxes on Sale                      6,075                          Capital Gain                  4,446
= After Tax Equity Reversion        44,848
                                                                    DepRecTax                     5,408
                                                                    Cap Gain Tax                    667
                                                                    Total Tax on Sale             6,075