310 4th St NE, Huron SD 57350

310 4th St NE, Huron, SD 57350

Commercial (Special-Purpose):

Investment strategy: Rental Property

Purchase Price$ 100,000

Rent$ 3,100/mo

Monthly Cash Flow$ 1,096

Cash on Cash Return19.05 %

Financial Analysis

Cash on Cash Return	19.05 %
Internal Rate of Return (IRR)	17.18 %
Capitalization Rate	18.60 %
Gross Rent Multiplier (GRM)	2.69
Debt-coverage Ratio (DCR)	3.41
Operating Expense Ratio (OER)	50.00 %

Financial Breakdown

Purchase Price	$ 100,000
Purchase Costs	$ 4,000
Repair/Construction Costs	$ 40,000
Total Capital Needed Total Capital Needed Includes all projects costs (except selling costs). Total Capital Needed Includes all projects costs (except selling costs).	$ 144,000
Financing	$ 75,000
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 69,000
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.	$ 25,000
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.	$ 44,000

Operating Analysis

Rent	$ 3,100/mo
Gross Operating Income (GOI)	$ 37,200
Total Expenses	$ 18,600
Net Operating Income (NOI)	$ 18,600
Annual Debt Service	$ 5,454
Cash Flow Before Taxes (CFBT)	$ 13,146
Income Tax Liability	$ 3,399
Cash Flow After Taxes (CFAT)	$ 9,748

Purchase Price	$ 100,000
Address	310 4th St NE , Huron, 57350, SD
Type	Commercial
Category	Special-Purpose

Unit	Rent
24 - 10x10 units	$ 2,400/mo
4 - 5x10 units	$ 200/mo
Shop	$ 500/mo

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.	$ 37,200
Total Gross Income	$ 37,200
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.	$ 37,200	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	$ 18,600	50.00 %
Total Expenses	$ 18,600	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.	$ 18,600	50.00 %

Cash Flow (Year 1)

Net Operating Income	$ 18,600	50.00 %
Annual Debt Service	$ 5,454	14.66 %
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.	$ 13,146	35.34 %
Income Tax Liability	$ 3,399	9.14 %
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.	$ 9,748	26.20 %

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.	64.66 %

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.	$ 144,028
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.	17.18 %
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	3.09
Annual Depreciation	$ 2,051

Holding period of 20 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.	19.05 %
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.	23.40 %
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.	18.60 %
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.	37.20 %
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.	2.69

Financing
Down Payment		$ 25,000
Dakotaland FCU		$ 75,000
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.		75.00 %
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).		53.57 %
Debt Coverage Ratio		3.41

Dakotaland FCU Financing of: Purchase price ($ 100,000)
Type	Amortized
Loan Amount	$ 75,000
Down payment (25%)	$ 25,000
Amortization	20 years
Interest Rate	4.00 %
Monthly Payment	$ 454.49

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
Operational Analysis
Gross Scheduled Income	0	37,200	37,944	38,703	39,477	40,266	41,072	41,893	42,731	43,586	44,457	45,347	46,254	47,179	48,122	49,085	50,066	51,068	52,089	53,131	54,193
Vacancy Loss	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Gross Operating Income	0	37,200	37,944	38,703	39,477	40,266	41,072	41,893	42,731	43,586	44,457	45,347	46,254	47,179	48,122	49,085	50,066	51,068	52,089	53,131	54,193
Expenses	0	18,600	18,972	19,351	19,738	20,133	20,536	20,947	21,366	21,793	22,229	22,673	23,127	23,589	24,061	24,542	25,033	25,534	26,045	26,565	27,097
Net Operating Income	0	18,600	18,972	19,351	19,738	20,133	20,536	20,947	21,366	21,793	22,229	22,673	23,127	23,589	24,061	24,542	25,033	25,534	26,044	26,565	27,097
Loan Payment	0	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454	5,454
Payment Interest Part	0	2,955	2,853	2,747	2,636	2,522	2,402	2,278	2,148	2,014	1,874	1,728	1,576	1,418	1,254	1,082	904	719	526	325	116
Payment Principal Part	0	2,499	2,601	2,707	2,817	2,932	3,052	3,176	3,305	3,440	3,580	3,726	3,878	4,036	4,200	4,371	4,550	4,735	4,928	5,129	5,337
Cash Flow
Repairs/Construction	40,000	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-69,000	13,146	13,518	13,898	14,285	14,679	15,082	15,493	15,912	16,339	16,775	17,219	17,673	18,135	18,607	19,088	19,579	20,080	20,591	21,112	21,643
Depreciation	0	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051	2,051
Taxes	0	3,399	3,517	3,638	3,763	3,890	4,021	4,154	4,292	4,432	4,576	4,724	4,875	5,030	5,189	5,352	5,519	5,691	5,867	6,047	6,232
Cash Flow After Taxes	-69,000	9,748	10,001	10,259	10,522	10,789	11,061	11,338	11,620	11,907	12,199	12,496	12,798	13,105	13,418	13,736	14,060	14,389	14,724	15,064	15,411

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 20 years. Below is the resale price calculated using different methods.

Appreciation (3.00%)	$ 180,611
Cap Rate (18.60%) & NOI	$ 145,681
Gross Rent Multiplier	$ 145,780

Sale Proceeds

Projected Selling Price	$ 180,611
Costs of Sale (6.00%)	$ 10,837
Net Sale Proceeds Before Tax	$ 169,774

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	$ 169,774
Investor Cash Outlay	$ 69,000
Net Assets	$ 100,774
Average Yield
Annual Net Assets	$ 5,039
Average Cash Flow (After Taxes)	$ 11,662
Average Annual Gain (After Taxes)	$ 16,700
Average Annual Yield (After Taxes)	16.70 %

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: 310 4th St NE, Huron RENTAL

Property Report :

310 4th St NE, Huron, SD 57350

Executive Summary