Commercial Real Estate Valuation and Financial Feasibility

ASSUMPTIONS
Annual Gross Rent, first year 3,000 250 Renda
Vacancy and Collection factor 10%
Operating Expenses, first year 420 300 Condominio
Annual % change in rent 3.0% 120 IMI
Annual % change in expenses 1.0% 420
Loan to Value ratio 50.0%
Stated Annual Interest rate 2.0%
Loan Term (years) 20
Percent of price in improvements 60.0%
CPI Annual Increase 3.0%
After tax, Real Discount rate 8.0%
Cap Rate assumed at date of sale 7.0%
Transaction costs as % of sales price 9.0%
Cap Rate at Purchase 7.0%

DEFINED VARIABLES Source

Recovery period (years) 10 Omnibus Budget Reconciliation Act of 1993
Income tax rate (Corporate) 25.0% IRS - Varies based on taxable income
Capital Gains tax rate 25.0% IRS - Varies based on income tax bracket

Property Valuation: $ 32,571.43

ECONOMIC VALUES, CALCULATED BY MODEL

Loan Amount 16,286
Equity Required 16,286
Mortgage Loan Constant 6.12%

DECISION ANALYSIS FACTORS

year 0 1 2 3 4 5 6 7 8 9 10 11
Real Cash Flow to Owner (16,286) 1,247 1,261 1,276 1,290 1,304 1,317 1,331 1,343 1,356 20,094 0
Present Value of Real Cash Flow (16,286) 1,154 1,081 1,013 948 887 830 776 726 678 9,307 0

NPV of Real Cash Flow: $ 1,116.82

After Tax Real Internal Rate of Return: 8.97%

PROFORMA INCOME STATEMENT

year 0 1 2 3 4 5 6 7 8 9 10 11
Annual Gross Rental Income na 3,000 3,090 3,183 3,278 3,377 3,478 3,582 3,690 3,800 3,914 4,032
Vacancy and Collection Losses na (300) (309) (318) (328) (338) (348) (358) (369) (380) (391) (403)
Effective Rental na 2,700 2,781 2,864 2,950 3,039 3,130 3,224 3,321 3,420 3,523 3,629
Operating Expenses na (420) (424) (428) (433) (437) (441) (446) (450) (455) (459) (464)
Net Operating Income na 2,280 2,357 2,436 2,518 2,602 2,689 2,778 2,870 2,965 3,064 3,165
Interest Expense na (326) (312) (299) (285) (270) (256) (241) (226) (211) (195) (179)
Depreciation (cost recovery) na (1,954) (1,954) (1,954) (1,954) (1,954) (1,954) (1,954) (1,954) (1,954) (1,954) (1,954)
Taxable Income na 0 90 183 279 377 478 583 690 801 914 1,031
Income Tax Liability na 0 (23) (46) (70) (94) (120) (146) (173) (200) (229) (258)
Net Income After Tax na 0 68 137 209 283 359 437 518 600 686 774

Developed by Questor Consulting LLC (561) 417-5515

PROFORMA CASH FLOW STATEMENT
year 0 1 2 3 4 5 6 7 8 9 10 11
Annual Gross Rental Income na 3,000 3,090 3,183 3,278 3,377 3,478 3,582 3,690 3,800 3,914 4,032
Vacancy and Collection Loses na (300) (309) (318) (328) (338) (348) (358) (369) (380) (391) (403)
Effective Rental na 2,700 2,781 2,864 2,950 3,039 3,130 3,224 3,321 3,420 3,523 3,629
Operating Expenses na (420) (424) (428) (433) (437) (441) (446) (450) (455) (459) (464)
Net Operating Income na 2,280 2,357 2,436 2,518 2,602 2,689 2,778 2,870 2,965 3,064 3,165
Debt Service na (996) (996) (996) (996) (996) (996) (996) (996) (996) (996) na
Income Tax Liability na 0 (23) (46) (70) (94) (120) (146) (173) (200) (229) na
Equity Dividend (cash to owner) na 1,284 1,338 1,394 1,452 1,512 1,573 1,636 1,702 1,769 1,839 na
Down Payment/Reversion (16,286) na na na na na na na na na 25,166 na
Total Cash Flow to Owner (16,286) 1,284 1,338 1,394 1,452 1,512 1,573 1,636 1,702 1,769 27,005 na
Purchasing Power Adjustment na 103% 106% 109% 113% 116% 119% 123% 127% 130% 134% na
Real Cash Flow to Owner (16,286) 1,247 1,261 1,276 1,290 1,304 1,317 1,331 1,343 1,356 20,094 na

MORTGAGE LOAN AMORTIZATION SCHEDULE

year 0 1 2 3 4 5 6 7 8 9 10 11
Balance Owed, beginning of year 16,286 15,615 14,932 14,234 13,523 12,798 12,058 11,303 10,533 9,748 8,946
Annual Mortgage Payment 996 996 996 996 996 996 996 996 996 996 996
Interest Portion of Payment (326) (312) (299) (285) (270) (256) (241) (226) (211) (195) (179)
Amortization of principal 670 684 697 711 726 740 755 770 785 801 817
Balance Owed, end of year 15,615 14,932 14,234 13,523 12,798 12,058 11,303 10,533 9,748 8,946 8,129

ANALYSIS OF REVERSION ON SALE

Net Operating Income Projected, Year After Sale (Year 11) 3,165
Cap Rate At Sale Date 7.00%
Capitalized Value (Sale Price) 45,209
Transaction Cost (4,069)
Net Sales Price 41,140
Book Value At Sales Date (cost-dep) (13,029)
Capital Gain ( Net Price - BV) 28,112
Capital Gains Tax 7,028
Mortgage Balance Owed 8,946
Reversion in nominal dollars to owner at sales date 25,166

Developed by Questor Consulting LLC (561) 417-5515