6931 E Palm Ln, Scottsdale AZ 85257

6931 E Palm Ln, Scottsdale, AZ 85257

Singlefamily: , 2 bathrooms

Year built: 1957, Size: 1408 SF

Investment strategy: Rental Property

Purchase Price$ 350,000

Rent$ 2,000/mo

Monthly Cash Flow$ 324

Cash on Cash Return2.73 %

Financial Analysis

Cash on Cash Return	2.73 %
Internal Rate of Return (IRR)	9.16 %
Capitalization Rate	5.43 %
Gross Rent Multiplier (GRM)	14.58
Debt-coverage Ratio (DCR)	1.26
Operating Expense Ratio (OER)	20.83 %

Financial Breakdown

Purchase Price	$ 350,000
Purchase Costs	$ 2,500
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).	$ 352,500
Financing	$ 210,000
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 142,500
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.	$ 140,000
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.	$ 2,500

Operating Analysis

Rent	$ 2,000/mo
Gross Operating Income (GOI)	$ 24,000
Total Expenses	$ 5,000
Net Operating Income (NOI)	$ 19,000
Annual Debt Service	$ 15,109
Cash Flow Before Taxes (CFBT)	$ 3,891
Income Tax Liability	$ -928
Cash Flow After Taxes (CFAT)	$ 4,819

6931 E Palm Ln, Scottsdale, AZ 85257 is a single family home built in 1957. This property was last sold for $145,000 in 2009 and currently has an estimated value of $588,800. According to the Scottsdale public records, the property at 6931 E Palm Ln, Scottsdale, AZ 85257 has approximately 1408 square feet, with a lot size of 8,781 square feet. Nearby schools include Coronado High School and Tonalea Elementary School.

Purchase Price	$ 350,000
Address	6931 E Palm Ln , Scottsdale, 85257, AZ
Year Built	1957
Type	Singlefamily
Size	1408 SF
Bathrooms	2

Property History

Date	Price	Change	Event
9/30/2009
7/2/2009
5/5/2009
1/28/2005
12/30/1999
2/24/1994
3/6/1987

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.	$ 24,000
Total Gross Income	$ 24,000
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.	$ 24,000	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).
Insurance	$ 1,500	6.25 %
Property tax	$ 3,500	14.58 %
Total Expenses	$ 5,000	20.83 %
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.	$ 19,000	79.17 %

Cash Flow (Year 1)

Net Operating Income	$ 19,000	79.17 %
Annual Debt Service	$ 15,109	62.95 %
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.	$ 3,891	16.21 %
Income Tax Liability	$ -928	-3.87 %
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.	$ 4,819	20.08 %

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).	20.83 %
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.	83.79 %

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.	$ 124,530
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.	9.16 %
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	1.87
Annual Depreciation	$ 10,182

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.	2.73 %
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.	10.10 %
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.	5.43 %
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.	6.86 %
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.	14.58

Financing
Down Payment		$ 140,000
Loan		$ 210,000
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.		60.00 %
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).		60.00 %
Debt Coverage Ratio		1.26

Loan Financing of: Purchase price ($ 350,000)
Type	Amortized
Loan Amount	$ 210,000
Down payment (40%)	$ 140,000
Amortization	30 years
Interest Rate	6.00 %
Monthly Payment	$ 1,259.06

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	24,000	24,480	24,970	25,469	25,978	26,498	27,028	27,568	28,120	28,682	29,256	29,841	30,438	31,047	31,668	32,301	32,947	33,606	34,278	34,963
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	24,000	24,480	24,970	25,469	25,978	26,498	27,028	27,568	28,120	28,682	29,256	29,841	30,438	31,047	31,668	32,301	32,947	33,606	34,278	34,963
Expenses	0	5,000	5,100	5,202	5,306	5,412	5,520	5,631	5,743	5,858	5,975	6,095	6,217	6,341	6,468	6,597	6,729	6,864	7,001	7,141	7,284
Net Operating Income	0	19,000	19,380	19,768	20,163	20,566	20,978	21,397	21,825	22,262	22,707	23,161	23,624	24,097	24,579	25,070	25,572	26,083	26,605	27,137	27,679
Loan Payment	0	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109	15,109
Payment Interest Part	0	12,530	12,371	12,202	12,023	11,832	11,630	11,416	11,188	10,946	10,689	10,417	10,127	9,820	9,494	9,148	8,780	8,390	7,975	7,535	7,068
Payment Principal Part	0	2,579	2,738	2,907	3,086	3,276	3,478	3,693	3,921	4,163	4,419	4,692	4,981	5,289	5,615	5,961	6,329	6,719	7,133	7,573	8,041
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
Cash Flow Before Taxes	-142,500	3,891	4,271	4,659	5,054	5,458	5,869	6,288	6,716	7,153	7,598	8,052	8,515	8,988	9,470	9,961	10,463	10,974	11,496	12,028	12,571
Depreciation	0	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182	10,182
Taxes	0	-928	-793	-654	-510	-362	-209	-50	114	283	459	641	829	1,024	1,226	1,435	1,652	1,878	2,112	2,355	2,607
Cash Flow After Taxes	-142,500	4,819	5,065	5,313	5,565	5,820	6,078	6,339	6,603	6,870	7,139	7,412	7,687	7,964	8,244	8,526	8,810	9,096	9,384	9,673	9,963

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%)	$ 632,139
Cap Rate (5.43%) & NOI	$ 509,750
Gross Rent Multiplier	$ 509,768

Sale Proceeds

Projected Selling Price	$ 632,139
Costs of Sale (6.00%)	$ 37,928
1. Loan Balance Payoff	$ 113,408
Net Sale Proceeds Before Tax	$ 480,803

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	$ 480,803
Investor Cash Outlay	$ 142,500
Net Assets	$ 338,303
Average Yield
Annual Net Assets	$ 16,915
Average Cash Flow (After Taxes)	$ 6,820
Average Annual Gain (After Taxes)	$ 23,735
Average Annual Yield (After Taxes)	6.78 %

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: 6931 E Palm Ln, Scottsdale RENTAL

Property Report :

6931 E Palm Ln, Scottsdale, AZ 85257

Executive Summary