861 14th Ave, Bethlehem PA 18018

861 14th Ave, Bethlehem, PA 18018

Commercial (Office):

Investment strategy: Rental Property

Purchase Price$ 750,000

Rent$ 13,500/mo

Monthly Cash Flow$ 9,695

Cash on Cash Return106.73 %

Financial Analysis

Cash on Cash Return	106.73 %
Internal Rate of Return (IRR)	83.37 %
Capitalization Rate	64.80 %
Gross Rent Multiplier (GRM)	1.54
Debt-coverage Ratio (DCR)	3.55
Operating Expense Ratio (OER)	0.00 %
After Repair Value	$ 250,000

Financial Breakdown

Purchase Price	$ 750,000
Purchase Costs	$ 30,000
Repair/Construction Costs	$ 80,000
Total Capital Needed Total Capital Needed Includes all projects costs (except selling costs). Total Capital Needed Includes all projects costs (except selling costs).	$ 860,000
Financing	$ 751,000
Total Cash Needed Cash out of Pocket Shows rehabber's cash outlay. Cash out of Pocket Shows rehabber's cash outlay.	$ 109,000
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.	$ 79,000
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.	$ 30,000

Operating Analysis

Rent	$ 13,500/mo
Gross Operating Income (GOI)	$ 162,000
Total Expenses	$ 0
Net Operating Income (NOI)	$ 162,000
Annual Debt Service	$ 45,662
Cash Flow Before Taxes (CFBT)	$ 116,338
Income Tax Liability	$ 28,267
Cash Flow After Taxes (CFAT)	$ 88,071

Purchase Price	$ 750,000
Address	861 14th Ave , Bethlehem, 18018, PA
Type	Commercial
Category	Office

861 14th Ave Bethlehem, PA 18018

$ 250,000

Property ARV
Commercial

Bldg type

#	Property address	Distance	Beds	Baths	SqFt	Bldg type	Date sold	Sale price	$/SqFt
1	712 4th Ave	0.8mi	8	8	5,682	other	12/30/2022	$ 927,500	$ 163
2	709 N New St	1.3mi			3,390	other	11/30/2022	$ 1,200,000	$ 354
Average:								$ 1,063,750	$ 259

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.	$ 162,000
Total Gross Income	$ 162,000
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.	$ 162,000	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).
Total Expenses	$ 0	0.00 %
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.	$ 162,000	100.00 %

Cash Flow (Year 1)

Net Operating Income	$ 162,000	100.00 %
Annual Debt Service	$ 45,662	28.19 %
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.	$ 116,338	71.81 %
Income Tax Liability	$ 28,267	17.45 %
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.	$ 88,071	54.36 %

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).	0.00 %
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.	28.19 %

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.	$ 1,798,309
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.	83.37 %
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	17.50
Annual Depreciation	$ 15,385

Holding period of 24 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.	106.73 %
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.	127.37 %
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.	64.80 %
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.	21.60 %
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.	1.54

Financing		% of ARV
Down Payment	$ 79,000	31.60 %
Loan 1	$ 675,000	270.00 %
Loan 2	$ 76,000	30.40 %
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.		100.13 %
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).		90.48 %
Debt Coverage Ratio		3.55

Loan 1 Financing of: Purchase price ($ 750,000)
Type	Amortized
Loan Amount	$ 675,000
Down payment (10%)	$ 75,000
Amortization	30 years
Interest Rate	4.50 %
Monthly Payment	$ 3,420.13

Loan 2 Financing of: Repair costs ($ 80,000)
Type	Amortized
Loan Amount	$ 76,000
Down payment (5%)	$ 4,000
Amortization	30 years
Interest Rate	4.50 %
Monthly Payment	$ 385.08

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
Operational Analysis
Gross Scheduled Income	0	162,000	165,240	168,545	171,916	175,354	178,861	182,438	186,087	189,809	193,605	197,477	201,427	205,455	209,564	213,756	218,031	222,391	226,839	231,376	236,003	240,723	245,538	250,449	255,458
Vacancy Loss	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
Gross Operating Income	0	162,000	165,240	168,545	171,916	175,354	178,861	182,438	186,087	189,809	193,605	197,477	201,427	205,455	209,564	213,756	218,031	222,391	226,839	231,376	236,003	240,723	245,538	250,449	255,458
Expenses	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
Net Operating Income	0	162,000	165,240	168,545	171,916	175,354	178,861	182,438	186,087	189,809	193,605	197,477	201,427	205,455	209,564	213,756	218,031	222,391	226,839	231,376	236,003	240,723	245,538	250,449	255,458
1. Loan Payment	0	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042	41,042
Payment Interest Part	0	30,152	29,652	29,129	28,581	28,009	27,410	26,784	26,129	25,444	24,728	23,978	23,194	22,374	21,517	20,620	19,682	18,700	17,674	16,600	15,478	14,303	13,075	11,790	10,446
Payment Principal Part	0	10,889	11,390	11,913	12,460	13,032	13,631	14,257	14,912	15,597	16,314	17,063	17,847	18,667	19,525	20,422	21,360	22,341	23,368	24,441	25,564	26,738	27,967	29,251	30,595
2. Loan Payment	0	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621	4,621
Payment Interest Part	0	3,395	3,339	3,280	3,218	3,154	3,086	3,016	2,942	2,865	2,784	2,700	2,611	2,519	2,423	2,322	2,216	2,106	1,990	1,869	1,743	1,610	1,472	1,327	1,176
Payment Principal Part	0	1,226	1,282	1,341	1,403	1,467	1,535	1,605	1,679	1,756	1,837	1,921	2,009	2,102	2,198	2,299	2,405	2,515	2,631	2,752	2,878	3,011	3,149	3,293	3,445
Total Debt Service	0	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662	45,662
Cash Flow
Repairs/Construction	80,000	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	-109,000	116,338	119,578	122,882	126,253	129,692	133,199	136,776	140,425	144,146	147,943	151,815	155,764	159,793	163,902	168,093	172,368	176,729	181,177	185,713	190,341	195,061	199,875	204,786	209,795
Depreciation	0	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385	15,385
Taxes	0	28,267	29,216	30,188	31,183	32,202	33,245	34,313	35,408	36,529	37,677	38,854	40,059	41,294	42,560	43,857	45,187	46,550	47,948	49,380	50,850	52,356	53,901	55,487	57,113
Cash Flow After Taxes	-109,000	88,071	90,361	92,694	95,070	97,490	99,954	102,462	105,017	107,618	110,265	112,961	115,705	118,499	121,342	124,236	127,181	130,179	133,229	136,333	139,491	142,705	145,974	149,300	152,683

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 24 years. Below is the resale price calculated using different methods.

Specific Resale Price	$ 1,500,000
Appreciation (3.00%)	$ 508,199
Cap Rate (64.80%) & NOI	$ 394,225
Gross Rent Multiplier	$ 393,405

Sale Proceeds

Projected Selling Price	$ 1,500,000
Costs of Sale (6.00%)	$ 90,000
1. Loan Balance Payoff	$ 215,454
2. Loan Balance Payoff	$ 24,259
Net Sale Proceeds Before Tax	$ 1,170,287

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	$ 1,170,287
Investor Cash Outlay	$ 109,000
Net Assets	$ 1,061,287
Average Yield
Annual Net Assets	$ 44,220
Average Cash Flow (After Taxes)	$ 111,922
Average Annual Gain (After Taxes)	$ 156,143
Average Annual Yield (After Taxes)	20.82 %

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: 861 14th Ave, Bethlehem RENTAL

Property Report :

861 14th Ave, Bethlehem, PA 18018

Executive Summary