5.5 Gross Rent Multiplier

10 unit building  composed of 1 bedroom units renting for $450.00 per month each

PRICE AND FINANCING AT 5.5 GROSS RENTAL INCOME  

ORIGINAL PURCHASE PRICE

300,000

100%

5.5 X Annual Rental Income

Down Payment was

45,000

15%

 

Loans: @9% amortized 30 years

255,000

85%

65% 1st.TD, 20% seller 2ndTD

OPERATING STATEMENT

Annual Gross Rental Income

54,500

100%

 

Less: expenses including mgt.

21,800

40%

 

NET OPERATING INCOME

32,700

60%

 

Less: Loan Payments

24,620

 

NET CASH FLOW

8,078    

18% cash on cash with $45,000 down payment

INVESTMENT RECAP

NET CASH FLOW

8,078

 

Plus: 1st. yr. mortgage reduction

1,742

 

Plus: tax savings - depreciation

2,290

assume 35% Fed & State tax rate

1st. yr. After Tax Yield on Equity

12,110 

27% on cash

 

 5 more years....

 FIFTH  YEAR PROJECTION - INCOME AND EXPENSES BOTH RISE 3% PER YEAR

PROJECTED VALUE

347,700

100%

3% yearly rent increase X 5.5 rent multiplier =$47,400 increase in value plus $10,506 principal reduction=$58,206 equity increase

Loan balance

244,494

70%

Equity ($45,000 + $58,206)

103,206

30%

FIFTH YEAR OPERATING STATEMENT

Annual Gross Rental Income

63,180

100%

increased 3% per year

Less: expenses including mgt.

25,272

40%

increased 3% per year

NET OPERATING INCOME

37,900

60%

increased 16% over 5 years

Less: Loan Payments

24,620

Payment remains constant

NET CASH FLOW

13,280    

30% on cash

increased 64% over 5 years

FIFTH YEAR INVESTMENT RECAP

NET CASH FLOW

13,280

 

Plus: 5th year mortgage reduction

2,490

 

tax savings

2,290

remains constant

assume 35% Fed & State tax rate

5th year After Tax Yield on Equity

18,000

40% on cash

increased 49% over 5 years

RETURN TO ECONOMIC MODELS

Fascinating Facts:

 

A 100 watt light bulb will burn 90 lbs of coal over it's 750 hour lifetime.

 

An average home burns 10,000 lbs of caol each year.

 

Steve Nauert 

Ca. Real Estate Broker
License 00622276

310-493-1999