772 South 2nd 10 Year Analysis: 772 S Second St, San Jose CA 95112

772 S Second St, San Jose, CA 95112

Investment strategy: Rental Property

Purchase Price$ 2,599,000

Rent$ 12,964/mo

Monthly Cash Flow$ 1,983

Cash on Cash Return1.83 %

Financial Analysis

Cash on Cash Return	1.83 %
Internal Rate of Return (IRR)	14.69 %
Capitalization Rate	3.99 %
Gross Rent Multiplier (GRM)	16.71
Debt-coverage Ratio (DCR)	1.30
Operating Expense Ratio (OER)	37.01 %

Financial Breakdown

Purchase Price	$ 2,599,000
Purchase Costs	$ 0
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).	$ 2,599,000
Financing	$ 1,299,500
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 1,299,500
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.	$ 1,299,500
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.	$ 0

Operating Analysis

Rent	$ 12,964/mo
Gross Operating Income (GOI)	$ 164,701
Total Expenses	$ 60,960
Net Operating Income (NOI)	$ 103,741
Annual Debt Service	$ 79,942
Cash Flow Before Taxes (CFBT)	$ 23,799
Income Tax Liability	$ -3,078
Cash Flow After Taxes (CFAT)	$ 26,877

Purchase Price	$ 2,599,000
Address	772 S Second St , San Jose, 95112, CA
MLS^® #	ND21222491
Listing Agent	Anthony Boudreault
Listing Broker	Coldwell Banker Res Brokerage

Property History

Date	Price	Change	Event
4/26/2001
11/7/1994
8/16/1988

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.	$ 155,568
Garage rental	$ 13,800
Total Gross Income	$ 169,368
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.	$ 4,667
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.	$ 164,701	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	$ 9,054	5.50 %
Utilities	$ 6,016	3.65 %
Insurance	$ 4,108	2.49 %
Repairs & Maintenance	$ 5,695	3.46 %
Property tax	$ 32,487	19.72 %
Landscaping & Garbage	$ 3,600	2.19 %
Total Expenses	$ 60,960	37.01 %
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.	$ 103,741	62.99 %

Cash Flow (Year 1)

Net Operating Income	$ 103,741	62.99 %
Annual Debt Service	$ 79,942	48.54 %
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.	$ 23,799	14.45 %
Income Tax Liability	$ -3,078	-1.87 %
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.	$ 26,877	16.32 %

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).	37.01 %
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.	85.55 %

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.	$ 1,669,914
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.	14.69 %
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	2.29
Annual Depreciation	$ 56,705

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.	1.83 %
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.	17.83 %
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.	3.99 %
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.	5.99 %
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.	16.71

Financing
Down Payment		$ 1,299,500
Loan		$ 1,299,500
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.		50.00 %
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).		50.00 %
Debt Coverage Ratio		1.30

Loan Financing of: Purchase price ($ 2,599,000)
Type	Amortized
Loan Amount	$ 1,299,500
Down payment (50%)	$ 1,299,500
Amortization	30 years
Interest Rate	4.60 %
Monthly Payment	$ 6,661.81

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	169,368	177,146	185,314	193,889	202,894	212,349	222,276	232,700	243,645	255,137
Vacancy Loss	0	4,667	4,900	5,145	5,403	5,673	5,956	6,254	6,567	6,895	7,240
Gross Operating Income	0	164,701	172,246	180,168	188,487	197,221	206,392	216,022	226,133	236,749	247,897
Expenses	0	60,960	62,179	63,423	64,691	65,985	67,305	68,651	70,024	71,424	72,853
Net Operating Income	0	103,741	110,067	116,745	123,795	131,236	139,087	147,371	156,109	165,325	175,044
Loan Payment	0	79,942	79,942	79,942	79,942	79,942	79,942	79,942	79,942	79,942	79,942
Payment Interest Part	0	59,346	58,379	57,366	56,305	55,194	54,032	52,814	51,540	50,206	48,809
Payment Principal Part	0	20,595	21,563	22,576	23,637	24,747	25,910	27,127	28,402	29,736	31,133
Cash Flow
Repairs/Construction	0	0	0	0	0	0	0	0	0	0	0
Cash Flow Before Taxes	-1,299,500	23,799	30,125	36,804	43,854	51,294	59,146	67,429	76,167	85,383	95,102
Depreciation	0	56,705	56,705	56,705	56,705	56,705	56,705	56,705	56,705	56,705	56,705
Taxes	0	-3,078	-1,254	669	2,696	4,834	7,088	9,463	11,966	14,604	17,383
Cash Flow After Taxes	-1,299,500	26,877	31,379	36,135	41,157	46,460	52,058	57,966	64,201	70,780	77,720

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 (8.00%)	$ 5,611,046
Cap Rate (3.99%) & NOI	$ 4,387,068
Gross Rent Multiplier	$ 4,263,340

Sale Proceeds

Projected Selling Price	$ 5,611,046
Costs of Sale (6.00%)	$ 336,663
1. Loan Balance Payoff	$ 1,044,073
Net Sale Proceeds Before Tax	$ 4,230,310

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	$ 4,230,310
Investor Cash Outlay	$ 1,299,500
Net Assets	$ 2,930,810
Average Yield
Annual Net Assets	$ 293,081
Average Cash Flow (After Taxes)	$ 42,701
Average Annual Gain (After Taxes)	$ 335,782
Average Annual Yield (After Taxes)	12.92 %

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: 772 South 2nd 10 Year Analysis RENTAL

Property Report :

772 South 2nd 10 Year Analysis

772 S Second St, San Jose, CA 95112

Executive Summary

772 S Second St, San Jose, CA 95112

Financial Analysis

Financial Breakdown

Total Capital Needed

Total Capital Needed

Cash out of Pocket

Cash out of Pocket

Cash at Closing

Cash at Closing

Cash During Rehab

Cash During Rehab

Operating Analysis

Property Description

Property History

Operating Analysis

Annual Property Operating Data

Gross Scheduled Income (GSI)

Gross Scheduled Income (GSI)

Vacancy and Credit Loss

Vacancy and Credit Loss

Gross Operating Income (GOI)

Gross Operating Income (GOI)

Operating Expenses

Operating Expenses

Net Operating Income (NOI)

Net Operating Income (NOI)

Cash Flow (Year 1)

Cash Flow

Cash Flow

Cash Flow

Cash Flow

Operating Ratios

Operating Expense Ratio

Operating Expense Ratio

Break-Even Ratio (BER)

Break-Even Ratio (BER)

Financial Analysis

Financial Measures

Net Present Value (NPV)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Internal Rate of Return (IRR)

Profitability Index

Profitability Index

Investment Return Ratios

Cash on Cash Return

Cash on Cash Return

Return on Investment

Return on Investment

Capitalization Rate

Capitalization Rate

Gross Rental Yield

Gross Rental Yield

Gross Rent Multiplier (GRM)

Gross Rent Multiplier (GRM)

Financing Overview

Loan to Value Ratio

Loan to Value Ratio

Loan to Cost Ratio

Loan to Cost Ratio

Long-term Cash Flow Forecast

Resale Analysis

Resale Price Evaluation Methods

Sale Proceeds

Net Assets and Yield

Photos