Revere Case

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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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