1503 Virginia Ave, Durham NC 27705

1503 Virginia Ave, Durham, NC 27705

Singlefamily: 3 bedrooms , 2 bathrooms

Year built: 1941, Size: 2882 SF

Investment strategy: Rental Property

Purchase Price$ 736,000

Rent$ 2,273/mo

Monthly Cash Flow$ -1,637

Cash on Cash Return-13.35 %

Financial Analysis

Cash on Cash Return	-13.35 %
Internal Rate of Return (IRR)	4.10 %
Capitalization Rate	1.91 %
Gross Rent Multiplier (GRM)	26.98
Debt-coverage Ratio (DCR)	0.42
Operating Expense Ratio (OER)	42.62 %

Financial Breakdown

Purchase Price	$ 736,000
Purchase Costs	$ 0
Repair/Construction Costs	$ 0
Total Capital Needed Total Capital Needed Includes all projects costs (except selling costs). Total Capital Needed Includes all projects costs (except selling costs).	$ 736,000
Financing	$ 588,800
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 147,200
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.	$ 147,200
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.	$ 0

Operating Analysis

Rent	$ 2,273/mo
Gross Operating Income (GOI)	$ 24,548
Total Expenses	$ 10,463
Net Operating Income (NOI)	$ 14,085
Annual Debt Service	$ 33,732
Cash Flow Before Taxes (CFBT)	$ -19,647
Income Tax Liability	$ -15,344
Cash Flow After Taxes (CFAT)	$ -4,302

1501 & 1503 Virginia Avenue is a one-of-a-kind Watts-Hillandale property offering a 2882 SF 3Br/2Bath home & 1014 SF detached accessory dwelling. The dwellings are located on 2 lots / .33 acres. Renovate the main home & create the ideal 1014 SF accessory unit or home office in the rear of the existing lot. Given the two-lot configuration, there are many possibilities for redevelopment. The main dwelling and accessory dwelling offer limitless reconfigurations and renovation potential.

Purchase Price	$ 736,000
Address	1503 Virginia Ave , Durham, 27705, NC
MLS^® #	2401400
Listing Agent	Luther Misenheimer
Listing Broker	Ward & Misenheimer Realtors
Year Built	1941
Type	Singlefamily
Size	2882 SF
Bedrooms	3
Bathrooms	2

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.	$ 27,276
Total Gross Income	$ 27,276
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.	$ 2,728
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.	$ 24,548	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).
Property manager	$ 948	3.86 %
Property tax	$ 7,163	29.18 %
Insurance	$ 2,352	9.58 %
Total Expenses	$ 10,463	42.62 %
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.	$ 14,085	57.38 %

Cash Flow (Year 1)

Net Operating Income	$ 14,085	57.38 %
Annual Debt Service	$ 33,732	137.41 %
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.	$ -19,647	-80.03 %
Income Tax Liability	$ -15,344	-62.51 %
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.	$ -4,302	-17.53 %

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).	42.62 %
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.	180.04 %

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.	$ -46,944
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.	4.10 %
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	0.68
Annual Depreciation	$ 21,411

Holding period of 30 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.	-13.35 %
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.	-8.35 %
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.	1.91 %
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.	3.71 %
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.	26.98

Financing
Down Payment		$ 147,200
30y		$ 588,800
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.		80.00 %
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).		80.00 %
Debt Coverage Ratio		0.42

30y Financing of: Purchase price ($ 736,000)
Type	Amortized
Loan Amount	$ 588,800
Down payment (20%)	$ 147,200
Amortization	30 years
Interest Rate	4.00 %
Monthly Payment	$ 2,811.02

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	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30
Operational Analysis
Gross Scheduled Income	0	27,276	27,549	27,824	28,102	28,384	28,667	28,954	29,244	29,536	29,831	30,130	30,431	30,735	31,043	31,353	31,667	31,983	32,303	32,626	32,952	33,282	33,615	33,951	34,290	34,633	34,980	35,329	35,683	36,040	36,400
Vacancy Loss	0	2,728	2,755	2,782	2,810	2,838	2,867	2,895	2,924	2,954	2,983	3,013	3,043	3,074	3,104	3,135	3,167	3,198	3,230	3,263	3,295	3,328	3,361	3,395	3,429	3,463	3,498	3,533	3,568	3,604	3,640
Gross Operating Income	0	24,548	24,794	25,042	25,292	25,545	25,801	26,059	26,319	26,582	26,848	27,117	27,388	27,662	27,938	28,218	28,500	28,785	29,073	29,364	29,657	29,954	30,253	30,556	30,861	31,170	31,482	31,796	32,114	32,436	32,760
Expenses	0	10,463	10,672	10,886	11,103	11,325	11,552	11,783	12,019	12,259	12,504	12,754	13,009	13,270	13,535	13,806	14,082	14,363	14,651	14,944	15,243	15,547	15,858	16,176	16,499	16,829	17,166	17,509	17,859	18,216	18,581
Net Operating Income	0	14,085	14,122	14,156	14,189	14,220	14,249	14,276	14,301	14,323	14,344	14,362	14,378	14,392	14,403	14,412	14,418	14,421	14,422	14,420	14,415	14,406	14,395	14,380	14,362	14,341	14,316	14,288	14,255	14,219	14,179
Loan Payment	0	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732	33,732
Payment Interest Part	0	23,363	22,941	22,501	22,044	21,567	21,072	20,556	20,019	19,460	18,879	18,274	17,644	16,989	16,306	15,596	14,858	14,089	13,288	12,455	11,589	10,686	9,747	8,770	7,753	6,695	5,593	4,447	3,254	2,012	720
Payment Principal Part	0	10,369	10,791	11,231	11,689	12,165	12,660	13,176	13,713	14,272	14,853	15,458	16,088	16,744	17,426	18,136	18,875	19,644	20,444	21,277	22,144	23,046	23,985	24,962	25,979	27,037	28,139	29,285	30,479	31,720	33,013
Cash Flow
Repairs/Construction	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-147,200	-19,647	-19,611	-19,576	-19,543	-19,513	-19,484	-19,457	-19,432	-19,409	-19,388	-19,370	-19,354	-19,340	-19,329	-19,320	-19,314	-19,311	-19,310	-19,312	-19,318	-19,326	-19,337	-19,352	-19,370	-19,391	-19,416	-19,445	-19,477	-19,513	-19,553
Depreciation	0	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411	21,411
Taxes	0	-15,344	-15,115	-14,878	-14,633	-14,379	-14,117	-13,846	-13,565	-13,274	-12,973	-12,661	-12,338	-12,004	-11,657	-11,298	-10,925	-10,539	-10,139	-9,723	-9,292	-8,846	-8,382	-7,901	-7,401	-6,882	-6,344	-5,785	-5,205	-4,602	-3,976
Cash Flow After Taxes	-147,200	-4,302	-4,496	-4,698	-4,911	-5,133	-5,367	-5,611	-5,867	-6,135	-6,415	-6,709	-7,016	-7,336	-7,672	-8,023	-8,389	-8,772	-9,172	-9,589	-10,025	-10,480	-10,956	-11,452	-11,969	-12,509	-13,072	-13,660	-14,272	-14,911	-15,577

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 30 years. Below is the resale price calculated using different methods.

Appreciation (1.00%)	$ 992,017
Cap Rate (1.91%) & NOI	$ 742,372
Gross Rent Multiplier	$ 982,070

Sale Proceeds

Projected Selling Price	$ 992,017
Costs of Sale (6.00%)	$ 59,521
Net Sale Proceeds Before Tax	$ 932,496

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	$ 932,496
Investor Cash Outlay	$ 147,200
Net Assets	$ 785,296
Average Yield
Annual Net Assets	$ 26,177
Average Cash Flow (After Taxes)	$ -8,297
Average Annual Gain (After Taxes)	$ 17,879
Average Annual Yield (After Taxes)	2.43 %

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: 1503 Virginia Ave, Durham RENTAL

Property Report :

1503 Virginia Ave, Durham, NC 27705

Executive Summary