RESIDENTIAL INCOME-PRODUCING PROPERTY CASH FLOW FORECASTING

Rental Property & Price Data. The rental property proposed is located at 3224 Nairn St in
the Scotsdale Neighborhood. This property has a total structure area of 2,612 sqft and a lot
size of 9,583 sqft. It is a beautiful completely remodeled 4-bedroom home in a great area. The
property is located between the Cielo Vista & Eastwood area. This home features 2- 3/4 baths
& 1/2 bath, completely redone. A spectacular kitchen with a beautiful island, quartz
countertops, decorative glass backsplash tile (off white), beautiful cabinets, & new stainless-
steel appliances! Tile throughout the home, windows recently replaced. 2 living areas, large
laundry room, and large backyard with storage. The property has a double attached garage
and refrigerated cooling system. According to Zillow, this property could be rented at $2,135
per month. The listing price of the property is $325,000 which means $124 price/sqft. This
property would be a good investment since its price/sqft proportion is under the average of
$145 price/sqft in El Paso. Additionally, the property is completely remodeled and has a great
location, near to schools, dining, shopping, and easy access.

Visuals of the Property.

Accurate Base Year Cash Flow. The cash flow for the base year are calculated considering
some assumptions:
Starting Property's Value $325,000
Starting Rent $ 2,135
Vacancy & Uncollected Rent 7%
Operating Expenses (% of Property's value) 1%
Rent Increase per year 5%
Leasing Commission 6%
Property Value Increase 6%
Property Tax 1.6%
Future Income Assumptions. Forecasting the expected rent of this property will be done
assuming a rent increase of 5% per year, considering the actual situation of the Real Estate
Market in El Paso, which is expected to continue over the next years.
Future Expense Assumptions. Forecasting the change in operating expenses expected for
the next 10 years, we can predict the expected operating expenses for the property, which will
be estimated assuming the 6% increase in the property value. In addition, the Property Taxes
and Leasing Commissions will increase proportionally to the increase in the property value.

Disposition Selling Price. Considering the expected increase in the Property Value over the
next 10 years, due to the specifical situation of the Real Estate Market in El Paso, the
disposition selling price of the property after 10 years producing income would be $548,081.

10-year Cash Flow Pro-Forma Statement: Net Operating Income (NOI) and Net Cash
Flow (NCF).

NOI= Effective Gross Income – Operating Expenses

NCF= NOI – Non-Operating Expenses

Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Property Value $325,000 $344,500 $365,170 $387,080 $410,305 $434,923 $461,019 $488,680 $518,001 $549,081
Revenue
Rental Income $ 25,620 $ 26,901 $ 28,246 $ 29,658 $ 31,141 $ 32,698 $ 34,333 $ 36,050 $ 37,852 $ 39,745
Potential Gross Rent $ 25,620 $ 26,901 $ 28,246 $ 29,658 $ 31,141 $ 32,698 $ 34,333 $ 36,050 $ 37,852 $ 39,745
Vacancy Loss $ 1,793 $ 1,883 $ 1,977 $ 2,076 $ 2,180 $ 2,289 $ 2,403 $ 2,523 $ 2,650 $ 2,782
Effective Gross Income (EGI) $ 23,827 $ 25,018 $ 26,269 $ 27,582 $ 28,961 $ 30,409 $ 31,930 $ 33,526 $ 35,203 $ 36,963
Operating Expenses
Property Management Fees $ 3,250 $ 3,445 $ 3,652 $ 3,871 $ 4,103 $ 4,349 $ 4,610 $ 4,887 $ 5,180 $ 5,491
Insurance $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Property Taxes $ 5,200 $ 5,512 $ 5,843 $ 6,193 $ 6,565 $ 6,959 $ 7,376 $ 7,819 $ 8,288 $ 8,785
Net Operating Income (NOI) $ 14,377 $ 15,061 $ 15,774 $ 16,518 $ 17,293 $ 18,101 $ 18,943 $ 19,821 $ 20,735 $ 21,687
Non-Operating Expenses
Leasing Commissions (LC) $ 1,537 $ 1,614 $ 1,695 $ 1,780 $ 1,868 $ 1,962 $ 2,060 $ 2,163 $
2,271 $ 2,385
Sale Price (Disposition Price) $ 549,081
Net Cash Flow (NCF) $ 12,839 $ 13,447 $ 14,080 $ 14,739 $ 15,425 $ 16,140 $ 16,883 $ 17,658 $ 18,464 $ 568,383

References:
Retrieved on October 04, 2023, from https://kvia.com/news/2022/01/03/el-paso-sees-rent-rate-
increases-more-than-double-a-typical-year/
Retrieved on October 04, 2023, from https://smartasset.com/taxes/texas-property-tax-
calculator#:~:text=Texas%20Property%20Taxes,-Photo%20credit%3A%20%C2%A9&text=Property
%20taxes%20in%20Texas%20are,%243%2C797%20annually%20in%20property%20taxes
Retrieved on October 04, 2023, from https://www.noradarealestate.com/blog/el-paso-real-estate-
market/#:~:text=According%20to%20data%20available%20through,6%25%20increase%20in
%20housing%20values.