2235 5th St, La Verne CA 91750

2235 5th St, La Verne, CA 91750

Singlefamily: 5 bedrooms , 3 bathrooms

Year built: 1910, Size: 2308 SF

Investment strategy: Rental Property

Purchase Price$ 970,000

Rent$ 6,000/mo

Monthly Cash Flow$ 871

Cash on Cash Return20.90 %

Financial Analysis

Cash on Cash Return	20.90 %
Internal Rate of Return (IRR)	39.49 %
Capitalization Rate	6.52 %
Gross Rent Multiplier (GRM)	13.47
Debt-coverage Ratio (DCR)	1.20
Operating Expense Ratio (OER)	10.37 %

Financial Breakdown

Purchase Price	$ 970,000
Purchase Costs	$ 1,500
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).	$ 971,500
Financing	$ 921,500
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 50,000
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.	$ 48,500
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.	$ 1,500

Operating Analysis

Rent	$ 6,000/mo
Gross Operating Income (GOI)	$ 70,560
Total Expenses	$ 7,318
Net Operating Income (NOI)	$ 63,242
Annual Debt Service	$ 52,793
Cash Flow Before Taxes (CFBT)	$ 10,449
Income Tax Liability	$ -385
Cash Flow After Taxes (CFAT)	$ 10,835

This beautiful craftsman-style home, built in 1910, features two homes on one lot. It sits in a quaint, tree-lined neighborhood conveniently located near the University of La Verne, Downtown La Verne, stores for shopping, and a bountiful amount of entertainment. You will be greeted by smiling neighbors and the birds chirping each morning. The front house is composed of three bedrooms, two bathrooms, and a beautiful sun room located on the south facing side of the house. It has a clean, fresh coat of interior paint, updated plumbing, and updated electrical. The fully-permitted, approximately 1, 200 square foot, ADU features two bedrooms, one bathroom, an office, and sits on top of a two-car garage with alley access. Sitting between the home and the ADU is a sizable yard which includes a large deck that can be utilized to host get-togethers, barbecues, entertainment, and so much more. The front yard has drought-resistant landscaping, AstroTurf, plenty of space for activities, and an adorable white picket fence to make it feel like home.

Purchase Price	$ 970,000
Address	2235 5th St , La Verne, 91750, CA
MLS^® #	CV23012842
Listing Agent	Sumer Mirovich
Listing Broker	Kaleo Real Estate Company
Year Built	1910
Type	Singlefamily
Size	2308 SF
Bedrooms	5
Bathrooms	3

Property History

Date	Price	Change	Event
5/10/1989
1/25/1978

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.	$ 72,000
Total Gross Income	$ 72,000
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.	$ 1,440
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.	$ 70,560	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 tax	$ 4,018	5.69 %
Insurance	$ 3,300	4.68 %
Total Expenses	$ 7,318	10.37 %
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.	$ 63,242	89.63 %

Cash Flow (Year 1)

Net Operating Income	$ 63,242	89.63 %
Annual Debt Service	$ 52,793	74.82 %
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.	$ 10,449	14.81 %
Income Tax Liability	$ -385	-0.55 %
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.	$ 10,835	15.36 %

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).	10.37 %
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.	85.19 %

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.	$ 390,046
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.	39.49 %
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	8.80
Annual Depreciation	$ 28,218

Holding period of 10 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.	20.90 %
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.	79.10 %
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.	6.52 %
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.	7.42 %
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.	13.47

Financing
Down Payment		$ 48,500
Loan		$ 921,500
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.		95.00 %
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).		95.00 %
Debt Coverage Ratio		1.20

Loan Financing of: Purchase price ($ 970,000)
Type	Amortized
Loan Amount	$ 921,500
Down payment (5%)	$ 48,500
Amortization	30 years
Interest Rate	4.00 %
Monthly Payment	$ 4,399.38

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
Operational Analysis
Gross Scheduled Income	0	72,000	73,440	74,909	76,407	77,935	79,494	81,084	82,705	84,359	86,047
Vacancy Loss	0	1,440	1,469	1,498	1,528	1,559	1,590	1,622	1,654	1,687	1,721
Gross Operating Income	0	70,560	71,971	73,411	74,879	76,376	77,904	79,462	81,051	82,672	84,326
Expenses	0	7,318	7,464	7,614	7,766	7,921	8,080	8,241	8,406	8,574	8,746
Net Operating Income	0	63,242	64,507	65,797	67,113	68,455	69,824	71,221	72,645	74,098	75,580
Loan Payment	0	52,793	52,793	52,793	52,793	52,793	52,793	52,793	52,793	52,793	52,793
Payment Interest Part	0	36,565	35,903	35,215	34,499	33,754	32,978	32,171	31,331	30,457	29,547
Payment Principal Part	0	16,228	16,889	17,577	18,293	19,039	19,814	20,622	21,462	22,336	23,246
Cash Flow
Repairs/Construction	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-50,000	10,449	11,714	13,004	14,320	15,663	17,032	18,428	19,853	21,306	22,787
Depreciation	0	28,218	28,218	28,218	28,218	28,218	28,218	28,218	28,218	28,218	28,218
Taxes	0	-385	96	591	1,099	1,621	2,157	2,708	3,274	3,856	4,454
Cash Flow After Taxes	-50,000	10,835	11,618	12,414	13,221	14,042	14,875	15,720	16,579	17,450	18,334

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 10 years. Below is the resale price calculated using different methods.

Appreciation (3.00%)	$ 1,303,599
Cap Rate (6.52%) & NOI	$ 1,159,204
Gross Rent Multiplier	$ 1,159,049

Sale Proceeds

Projected Selling Price	$ 1,303,599
Costs of Sale (3.00%)	$ 39,108
1. Loan Balance Payoff	$ 725,994
Net Sale Proceeds Before Tax	$ 538,497

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	$ 538,497
Investor Cash Outlay	$ 50,000
Net Assets	$ 488,497
Average Yield
Annual Net Assets	$ 48,850
Average Cash Flow (After Taxes)	$ 12,675
Average Annual Gain (After Taxes)	$ 61,525
Average Annual Yield (After Taxes)	6.34 %

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: 2235 5th St, La Verne RENTAL

Property Report :

2235 5th St, La Verne, CA 91750

Executive Summary