301 Richwood Ave, Morgantown WV 26505

301 Richwood Ave, Morgantown, WV 26505

Investment strategy: Rental Property

Purchase Price$ 200,000

Rent$ 2,250/mo

Monthly Cash Flow$ 359

Cash on Cash Return12.74 %

Financial Analysis

Cash on Cash Return	12.74 %
Internal Rate of Return (IRR)	16.36 %
Capitalization Rate	9.29 %
Gross Rent Multiplier (GRM)	7.41
Debt-coverage Ratio (DCR)	1.30
Operating Expense Ratio (OER)	29.09 %

Financial Breakdown

Purchase Price	$ 200,000
Purchase Costs	$ 3,800
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).	$ 203,800
Financing	$ 170,000
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 33,800
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.	$ 30,000
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.	$ 3,800

Operating Analysis

Rent	$ 2,250/mo
Gross Operating Income (GOI)	$ 26,190
Total Expenses	$ 7,619
Net Operating Income (NOI)	$ 18,571
Annual Debt Service	$ 14,264
Cash Flow Before Taxes (CFBT)	$ 4,307
Income Tax Liability	$ 14
Cash Flow After Taxes (CFAT)	$ 4,293

Purchase Price	$ 200,000
Address	301 Richwood Ave , Morgantown, 26505, WV

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.	$ 27,000
Total Gross Income	$ 27,000
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.	$ 810
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.	$ 26,190	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	$ 2,619	10.00 %
Insurance	$ 1,500	5.73 %
Repairs	$ 2,000	7.64 %
Property tax	$ 1,500	5.73 %
Total Expenses	$ 7,619	29.09 %
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.	$ 18,571	70.91 %

Cash Flow (Year 1)

Net Operating Income	$ 18,571	70.91 %
Annual Debt Service	$ 14,264	54.46 %
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.	$ 4,307	16.45 %
Income Tax Liability	$ 14	0.05 %
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.	$ 4,293	16.39 %

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).	29.09 %
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.	83.55 %

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.	$ 184,361
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.	16.36 %
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	6.45
Annual Depreciation	$ 5,818

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.	12.74 %
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.	30.49 %
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.	9.29 %
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.	13.50 %
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.	7.41

Financing
Down Payment		$ 30,000
Loan		$ 170,000
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.		85.00 %
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).		85.00 %
Debt Coverage Ratio		1.30

Loan Financing of: Purchase price ($ 200,000)
Type	Amortized
Loan Amount	$ 170,000
Down payment (15%)	$ 30,000
Amortization	30 years
Balloon Payment	Year 15
Interest Rate	7.50 %
Monthly Payment	$ 1,188.66

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	27,000	27,540	28,091	28,653	29,226	29,810	30,406	31,015	31,635	32,268	32,913	33,571	34,243	34,927	35,626	36,338	37,065	37,807	38,563	39,334	40,121	40,923	41,741	42,576	43,428	44,296	45,182	46,086	47,008	47,948
Vacancy Loss	0	810	826	843	860	877	894	912	930	949	968	987	1,007	1,027	1,048	1,069	1,090	1,112	1,134	1,157	1,180	1,204	1,228	1,252	1,277	1,303	1,329	1,355	1,383	1,410	1,438
Gross Operating Income	0	26,190	26,714	27,248	27,793	28,349	28,916	29,494	30,084	30,686	31,299	31,925	32,564	33,215	33,880	34,557	35,248	35,953	36,672	37,406	38,154	38,917	39,695	40,489	41,299	42,125	42,967	43,827	44,703	45,597	46,509
Expenses	0	7,619	7,771	7,927	8,085	8,247	8,412	8,580	8,752	8,927	9,105	9,288	9,473	9,663	9,856	10,053	10,254	10,459	10,668	10,882	11,099	11,321	11,548	11,779	12,014	12,255	12,500	12,750	13,005	13,265	13,530
Net Operating Income	0	18,571	18,942	19,321	19,708	20,102	20,504	20,914	21,332	21,759	22,194	22,638	23,091	23,553	24,024	24,504	24,994	25,494	26,004	26,524	27,054	27,596	28,147	28,710	29,285	29,870	30,468	31,077	31,699	32,333	32,979
Loan Payment	0	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	14,264	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Payment Interest Part	0	12,697	12,575	12,444	12,303	12,151	11,986	11,810	11,619	11,414	11,193	10,954	10,697	10,420	10,122	9,800	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Payment Principal Part	0	1,567	1,689	1,820	1,961	2,113	2,277	2,454	2,645	2,850	3,071	3,310	3,567	3,844	4,142	132,689	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
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	-33,800	4,307	4,678	5,057	5,444	5,838	6,240	6,650	7,068	7,495	7,930	8,374	8,827	9,289	9,760	-117,985	24,994	25,494	26,004	26,524	27,054	27,596	28,147	28,710	29,285	29,870	30,468	31,077	31,699	32,333	32,979
Depreciation	0	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818	5,818
Taxes	0	14	137	265	397	533	675	822	974	1,132	1,296	1,466	1,644	1,829	2,021	2,221	4,794	4,919	5,046	5,176	5,309	5,444	5,582	5,723	5,867	6,013	6,162	6,315	6,470	6,629	6,790
Cash Flow After Taxes	-33,800	4,293	4,541	4,793	5,047	5,305	5,565	5,828	6,094	6,363	6,634	6,908	7,183	7,460	7,739	-120,207	20,200	20,575	20,957	21,347	21,745	22,151	22,565	22,987	23,418	23,857	24,305	24,762	25,228	25,704	26,189

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 (3.00%)	$ 485,452
Cap Rate (9.29%) & NOI	$ 354,997
Gross Rent Multiplier	$ 355,293

Sale Proceeds

Projected Selling Price	$ 485,452
Costs of Sale (6.00%)	$ 29,127
Net Sale Proceeds Before Tax	$ 456,325

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	$ 456,325
Investor Cash Outlay	$ 33,800
Net Assets	$ 422,525
Average Yield
Annual Net Assets	$ 14,084
Average Cash Flow (After Taxes)	$ 9,445
Average Annual Gain (After Taxes)	$ 23,529
Average Annual Yield (After Taxes)	11.76 %

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: 301 Richwood Ave, Morgantown RENTAL

Property Report :

301 Richwood Ave, Morgantown, WV 26505

Executive Summary