Deep Cove Market: 10940 WEST SAANICH R, North Saanich 98010

10940 WEST SAANICH R, North Saanich, 98010

Commercial (Retail):

Investment strategy: Rental Property

Purchase Price$ 1,800,000

Rent$ 15,000/mo

Monthly Cash Flow$ 3,203

Cash on Cash Return4.05 %

Financial Analysis

Cash on Cash Return	4.05 %
Internal Rate of Return (IRR)	8.46 %
Capitalization Rate	5.00 %
Gross Rent Multiplier (GRM)	10.00
Debt-coverage Ratio (DCR)	1.75
Operating Expense Ratio (OER)	50.00 %

Financial Breakdown

Purchase Price	$ 1,800,000
Purchase Costs	$ 30,000
Repair/Construction Costs	$ 20,000
Total Capital Needed Total Capital Needed Includes all projects costs (except selling costs). Total Capital Needed Includes all projects costs (except selling costs).	$ 1,850,000
Financing	$ 900,000
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 950,000
Cash at Closing Cash at Closing This number includes down payment and loan points. Cash at Closing This number includes down payment and loan points.	$ 900,000
Cash During Rehab Cash During Rehab Shows the cash amount remaining to fund the purchase and rehab/construction. Cash During Rehab Shows the cash amount remaining to fund the purchase and rehab/construction.	$ 50,000

Operating Analysis

Rent	$ 15,000/mo
Gross Operating Income (GOI)	$ 180,000
Total Expenses	$ 90,000
Net Operating Income (NOI)	$ 90,000
Annual Debt Service	$ 51,561
Cash Flow Before Taxes (CFBT)	$ 38,439
Income Tax Liability	$ 4,341
Cash Flow After Taxes (CFAT)	$ 34,098

Purchase Price	$ 1,800,000
Address	10940 WEST SAANICH R , North Saanich, 98010
Type	Commercial
Category	Retail

Annual Property Operating Data

Incomes		% of GOI
Gross Scheduled Income Gross Scheduled Income (GSI) Represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents. Gross Scheduled Income (GSI) Represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents.	$ 180,000
Total Gross Income	$ 180,000
Vacancy loss Vacancy and Credit Loss Part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants. Vacancy and Credit Loss Part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants.	$ 0
Gross Operating Income Gross Operating Income (GOI) An actual income which is expected to be collected in the property. Gross Operating Income (GOI) An actual income which is expected to be collected in the property.	$ 180,000	100.00 %
Expenses Operating Expenses Expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn't include mortgage payments or depreciation). Operating Expenses Expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn't include mortgage payments or depreciation).
50% rule	$ 90,000	50.00 %
Total Expenses	$ 90,000	50.00 %
Net Operating Income Net Operating Income (NOI) Important measurement calculated as gross operating income minus operating expenses. Net Operating Income (NOI) Important measurement calculated as gross operating income minus operating expenses.	$ 90,000	50.00 %

Cash Flow (Year 1)

Net Operating Income	$ 90,000	50.00 %
Annual Debt Service	$ 51,561	28.64 %
Cash Flow Before Taxes (CFBT) Cash Flow All the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property. Cash Flow All the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.	$ 38,439	21.36 %
Income Tax Liability	$ 4,341	2.41 %
Cash Flow After Taxes (CFAT) Cash Flow All the inflows and outflows of cash (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property. Cash Flow All the inflows and outflows of cash (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.	$ 34,098	18.94 %

Operating Ratios

Operating Expense Ratio Operating Expense Ratio Ratio of the operating expenses to the gross operating income (GOI). Operating Expense Ratio Ratio of the operating expenses to the gross operating income (GOI).	50.00 %
Break-Even Ratio Break-Even Ratio (BER) Another benchmark used by mortgage lenders, estimating how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less. Break-Even Ratio (BER) Another benchmark used by mortgage lenders, estimating how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less.	78.64 %

Financial Measures

Net Present Value Net Present Value (NPV) Probably the best measure of any investment thanks to its complexity; taking into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. More information and an example on the blog. Net Present Value (NPV) Probably the best measure of any investment thanks to its complexity; taking into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. More information and an example on the blog.	$ 473,149
Internal Rate of Return Internal Rate of Return (IRR) Rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero. Internal Rate of Return (IRR) Rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero.	8.46 %
Profitability Index Profitability Index Similar to NPV, also calculates with the present values of future cash flows and discount rate. It shows whether the present value of the cash flows is worth the initial investment. Good investment should be above 1.0 Profitability Index Similar to NPV, also calculates with the present values of future cash flows and discount rate. It shows whether the present value of the cash flows is worth the initial investment. Good investment should be above 1.0	1.50
Annual Depreciation	$ 36,923

Holding period of 15 years and discount rate of 5.00% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore don't provide such an exact information.

Investment Return Ratios

Cash on Cash Return Cash on Cash Return Ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It does not take in account the future value of money. Cash on Cash Return Ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It does not take in account the future value of money.	4.05 %
Return on Investment Return on Investment Very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year. Return on Investment Very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year.	9.73 %
Capitalization Rate Capitalization Rate Calculated as ratio of the net operating income and the value of the property. Capitalization Rate Calculated as ratio of the net operating income and the value of the property.	5.00 %
Gross Rental Yield Gross Rental Yield Used for a particular property or also as a market indicator when using median values of rent and house prices - counted from gross scheduled rent and initial investment. Gross Rental Yield Used for a particular property or also as a market indicator when using median values of rent and house prices - counted from gross scheduled rent and initial investment.	10.00 %
Gross Rent Multiplier Gross Rent Multiplier (GRM) Counted as a ratio of market value of the property and gross scheduled income. Gross Rent Multiplier (GRM) Counted as a ratio of market value of the property and gross scheduled income.	10.00

Financing
Down Payment		$ 900,000
Loan		$ 900,000
Loan to Value Ratio Loan to Value Ratio Shows sum of all purchase and rehab loans divided by purchase price. Loan to Value Ratio Shows sum of all purchase and rehab loans divided by purchase price.		50.00 %
Loan to Cost Ratio Loan to Cost Ratio Shows sum of all purchase and rehab loans to construction cost (purchase price + repairs). Loan to Cost Ratio Shows sum of all purchase and rehab loans to construction cost (purchase price + repairs).		49.45 %
Debt Coverage Ratio		1.75

Loan Financing of: Purchase price ($ 1,800,000)
Type	Amortized
Loan Amount	$ 900,000
Down payment (50%)	$ 900,000
Amortization	30 years
Interest Rate	4.00 %
Monthly Payment	$ 4,296.74

This chart shows the process of accumulation of investor's equity. There is some equity created right at the beginning with the rehab/construction and later investor's equity is rising by paying off the principal of the loan and also by appreciation over the years. All the green parts is the cummulative equity belonging to the investor and the red part belongs to the lender.

Year	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Operational Analysis
Gross Scheduled Income	0	180,000	183,600	187,272	191,017	194,838	198,735	202,709	206,763	210,899	215,117	219,419	223,807	228,284	232,849	237,506
Vacancy Loss	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Gross Operating Income	0	180,000	183,600	187,272	191,017	194,838	198,735	202,709	206,763	210,899	215,117	219,419	223,807	228,284	232,849	237,506
Expenses	0	90,000	91,800	93,636	95,509	97,419	99,367	101,355	103,382	105,449	107,558	109,710	111,904	114,142	116,425	118,753
Net Operating Income	0	90,000	91,800	93,636	95,509	97,419	99,367	101,355	103,382	105,449	107,558	109,709	111,904	114,142	116,425	118,753
Loan Payment	0	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561	51,561
Payment Interest Part	0	35,712	35,066	34,394	33,694	32,966	32,209	31,420	30,600	29,746	28,857	27,932	26,969	25,968	24,925	23,840
Payment Principal Part	0	15,849	16,495	17,167	17,867	18,594	19,352	20,140	20,961	21,815	22,704	23,629	24,591	25,593	26,636	27,721
Cash Flow
Repairs/Construction	20,000	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-950,000	38,439	40,239	42,075	43,948	45,858	47,806	49,794	51,821	53,889	55,997	58,149	60,343	62,581	64,864	67,192
Depreciation	0	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923	36,923
Taxes	0	4,341	4,953	5,580	6,223	6,882	7,559	8,253	8,965	9,695	10,445	11,214	12,003	12,813	13,644	14,498
Cash Flow After Taxes	-950,000	34,098	35,286	36,495	37,725	38,976	40,248	41,541	42,856	44,193	45,553	46,935	48,340	49,768	51,220	52,695

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 15 years. Below is the resale price calculated using different methods.

Appreciation (3.00%)	$ 2,804,341
Cap Rate (5.00%) & NOI	$ 2,375,062
Gross Rent Multiplier	$ 2,375,062

Sale Proceeds

Projected Selling Price	$ 2,804,341
Costs of Sale (6.00%)	$ 168,260
1. Loan Balance Payoff	$ 580,885
Net Sale Proceeds Before Tax	$ 2,055,195

In the resale analysis we do not include any calculation for taxes that might be owed on sale of the property. The tax laws for the resale are rather complex and subjected to frequent changes.

Net Assets and Yield

Net Assets
Sale Proceeds Before Tax	$ 2,055,195
Investor Cash Outlay	$ 950,000
Net Assets	$ 1,105,195
Average Yield
Annual Net Assets	$ 73,680
Average Cash Flow (After Taxes)	$ 39,549
Average Annual Gain (After Taxes)	$ 113,229
Average Annual Yield (After Taxes)	6.29 %

This charts shows Net Present Value (NPV) when property is sold in various years, i.e. when sold in 5th year, the NPV is calculated from 5 years of Cash Flow (including the selling price) and this NPV is displayed in year 5. Optimal holding period can be estimated, using this method - when NPV is the highest. Please note that appreciation growth can change these numbers greatly. It sometimes makes sense to sell the property even before the end of the mortgage term.

Property Report: Deep Cove Market RENTAL

Property Report :

Deep Cove Market

10940 WEST SAANICH R, North Saanich, 98010

Executive Summary

10940 WEST SAANICH R, North Saanich, 98010

Financial Analysis

Financial Breakdown

Total Capital Needed

Total Capital Needed

Cash out of Pocket

Cash out of Pocket

Cash at Closing

Cash at Closing

Cash During Rehab

Cash During Rehab

Operating Analysis

Property Description

Operating Analysis

Annual Property Operating Data

Gross Scheduled Income (GSI)

Gross Scheduled Income (GSI)

Vacancy and Credit Loss

Vacancy and Credit Loss

Gross Operating Income (GOI)

Gross Operating Income (GOI)

Operating Expenses

Operating Expenses

Net Operating Income (NOI)

Net Operating Income (NOI)

Cash Flow (Year 1)

Cash Flow

Cash Flow

Cash Flow

Cash Flow

Operating Ratios

Operating Expense Ratio

Operating Expense Ratio

Break-Even Ratio (BER)

Break-Even Ratio (BER)

Financial Analysis

Financial Measures

Net Present Value (NPV)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Internal Rate of Return (IRR)

Profitability Index

Profitability Index

Investment Return Ratios

Cash on Cash Return

Cash on Cash Return

Return on Investment

Return on Investment

Capitalization Rate

Capitalization Rate

Gross Rental Yield

Gross Rental Yield

Gross Rent Multiplier (GRM)

Gross Rent Multiplier (GRM)

Financing Overview

Loan to Value Ratio

Loan to Value Ratio

Loan to Cost Ratio

Loan to Cost Ratio

Long-term Cash Flow Forecast

Resale Analysis

Resale Price Evaluation Methods

Sale Proceeds

Net Assets and Yield

Photos