Revere Case

684 Words Oct 27th, 2011 3 Pages
Mortgage: $450,000 20yr 8% Interest Potential Gross Income

$91,200
Less: Allowance for Vacancy @ 5%

4,560
Effective Gross Income

$86,640
Less: Operating Expenses

Total $25,194

Real Estate Taxes

7,800

Utilities

4,330

Insurance Fee

2,600

Maintenance Fee

1,800

Management Fee @ 5%

4,332

Repairs @ 5%

4,332
Net Operating Income

$61,446
Less: Annual Debt Service

45,900
BTCF from Operations

$15,546
Less: Income Tax

3,003.89
ATCF from Operations

$ 12,542.11

Equity Dividend Rate = BTCF / Initial Cash Outlay
EDR = $15,546 / $99,000 = 0.15703 ≈ 15.7%

Income Tax Calculation Mortgage: $450,000 Net operating Income

$61,446
Less: Interest
…show more content…
CONDO OPTION

Mortgage: $450,000

Mortgage: $400,000
Potential Gross Income: Potential Gross Income:
$200,000*4units = $800,000 $200,000*4units = $800,000
Cost: $225,000—$200,000=$25,000 Cost: $225,000—$200,000=$25,000
Total Cost: $549,000+$25,000=$574,000 Total Cost: $544,500+$25,000=$569,500
Less: Total Cost $574,000 Less: Total Cost $569,500
Effective Gross Income: $226,000 Effective Gross Income: $230,000

If Alexander were to sell the complex as condos he would benefit more from selling the condos under the $450,000 mortgage even though he EGI is lower than under the $400,000 mortgage. This is because Alexander would need a much higher amount of

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