72 W Sylvania Ave, Neptune City NJ 07753

72 W Sylvania Ave, Neptune City, NJ 07753

Commercial (Mixed-Use):

Investment strategy: Rental Property

Purchase Price$ 517,000

Rent$ 6,850/mo

Monthly Cash Flow$ 1,309

Cash on Cash Return11.06 %

Financial Analysis

Cash on Cash Return	11.06 %
Internal Rate of Return (IRR)	16.49 %
Capitalization Rate	10.28 %
Gross Rent Multiplier (GRM)	6.29
Debt-coverage Ratio (DCR)	1.42
Operating Expense Ratio (OER)	28.16 %
After Repair Value	$ 517,000

Financial Breakdown

Purchase Price	$ 517,000
Purchase Costs	$ 12,755
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).	$ 529,755
Financing	$ 387,750
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 142,005
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.	$ 137,005
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.	$ 5,000

Operating Analysis

Rent	$ 6,850/mo
Gross Operating Income (GOI)	$ 73,980
Total Expenses	$ 20,829
Net Operating Income (NOI)	$ 53,151
Annual Debt Service	$ 37,439
Cash Flow Before Taxes (CFBT)	$ 15,712
Income Tax Liability	$ 1,939
Cash Flow After Taxes (CFAT)	$ 13,773

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.	$ 82,200
Total Gross Income	$ 82,200
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.	$ 8,220
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.	$ 73,980	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).
Utilities	$ 2,460	3.33 %
Insurance	$ 3,850	5.20 %
Repairs	$ 2,219	3.00 %
Property tax	$ 11,000	14.87 %
	$ 1,300	1.76 %
Total Expenses	$ 20,829	28.16 %
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.	$ 53,151	71.84 %

Cash Flow (Year 1)

Net Operating Income	$ 53,151	71.84 %
Annual Debt Service	$ 37,439	50.61 %
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.	$ 15,712	21.24 %
Income Tax Liability	$ 1,939	2.62 %
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.	$ 13,773	18.62 %

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).	28.16 %
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.	78.76 %

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.	$ 173,523
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.	16.49 %
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	2.22
Annual Depreciation	$ 10,605

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.	11.06 %
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.	21.99 %
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.	10.28 %
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.	15.90 %
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.	6.29

Financing		% of ARV
Down Payment	$ 129,250	25.00 %
CRE Loan	$ 387,750	75.00 %
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).		75.00 %
Debt Coverage Ratio		1.42

CRE Loan Financing of: Purchase price ($ 517,000)
Type	Amortized
Loan Amount	$ 387,750
Down payment (25%)	$ 129,250
Amortization	30 years
Interest Rate	9.00 %
Monthly Payment	$ 3,119.92

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	82,200	83,844	85,521	87,231	88,976	90,755	92,571	94,422	96,310	98,237
Vacancy Loss	0	8,220	8,384	8,552	8,723	8,898	9,076	9,257	9,442	9,631	9,824
Gross Operating Income	0	73,980	75,460	76,969	78,508	80,078	81,680	83,314	84,980	86,679	88,413
Expenses	0	20,829	21,246	21,671	22,104	22,546	22,997	23,457	23,926	24,405	24,893
Net Operating Income	0	53,151	54,214	55,298	56,404	57,532	58,683	59,856	61,053	62,274	63,520
Loan Payment	0	37,439	37,439	37,439	37,439	37,439	37,439	37,439	37,439	37,439	37,439
Payment Interest Part	0	34,790	34,541	34,270	33,972	33,647	33,291	32,902	32,477	32,011	31,502
Payment Principal Part	0	2,649	2,898	3,169	3,467	3,792	4,148	4,537	4,962	5,428	5,937
Cash Flow
Repairs/Construction	0	0	0	0	0	5,000	0	0	0	0	0
Cash Flow Before Taxes	-142,005	15,712	16,775	17,859	18,965	15,093	21,243	22,417	23,614	24,835	26,081
Depreciation	0	10,605	10,605	10,605	10,605	10,605	10,605	10,605	10,605	10,605	10,605
Taxes	0	1,939	2,267	2,606	2,957	2,070	3,697	4,087	4,493	4,915	5,353
Cash Flow After Taxes	-142,005	13,773	14,508	15,253	16,008	13,023	17,547	18,330	19,121	19,921	20,728

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%)	$ 694,805
Cap Rate (10.28%) & NOI	$ 617,898
Gross Rent Multiplier	$ 617,908

Sale Proceeds

Projected Selling Price	$ 694,805
Costs of Sale (6.00%)	$ 41,688
1. Loan Balance Payoff	$ 346,764
Net Sale Proceeds Before Tax	$ 306,353

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	$ 306,353
Investor Cash Outlay	$ 142,005
Net Assets	$ 164,348
Average Yield
Annual Net Assets	$ 16,435
Average Cash Flow (After Taxes)	$ 14,748
Average Annual Gain (After Taxes)	$ 31,183
Average Annual Yield (After Taxes)	6.03 %

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: 72 W Sylvania Ave, Neptune City RENTAL

Property Report :

72 W Sylvania Ave, Neptune City, NJ 07753

Executive Summary