Residential Apartment Building 138 units Apartment Breakdown Monthly Rent (36) S

Question

Residential Apartment Building

138 units

   Apartment Breakdown       Monthly Rent

       (36) Studios           $ 750.00

       (48) 1 Bedrooms          1,500.00

       (42) 2 Bedrooms          2,200.00

       (12) 3 Bedrooms          2,700.00

Closing Costs:          2.5% of Purchase Price

Vacancy:          3% of Gross Potential Rent

Loan Constant:      6.5%

Ordinary Income Tax Rate:   28%

   Capital Improvements:   $ 213,000

   Real Estate Taxes       187,000

   Insurance           73,000

   Annual Debt Service       1,337,213

   Payroll   and Payroll Taxes   185,000

   Union Benefits       37,500

   Utilities           78,000

   Repairs           150,000

   Supplies           30,000

   Legal and Accounting       25,000

1.   What is the Gross Potential Rent Income?

2.   If the property were purchased at a 7% capitalization rate, what is the Purchase Price?

3.   What is the Net Rent?

4.   If the depreciable basis of the property is based on 80% of the purchase price, what is the annual depreciation?

5.   What is the Vacancy Allowance

Explanation / Answer

1 Calculation of Gross Potential Rent Income A B C=A*12*B Number Monthly Rent Total Annual Rent Studios 36 $750 $324,000 1 Bedroom 48 $1,500 $864,000 2 Bedroom 42 $2,200 $1,108,800 3 Bedroom 12 $2,700 $388,800 SUM $2,685,600 D Total Annual rent $2,685,600 E=0.03*D Vacancy $80,568 F=D-E Gross Potential Rent Income $2,605,032 2 Calculation of Purchase Price Capitalizarion Rate 7% Gross Potential Rent Income $2,605,032 Expenses: Real Estate taxes $187,000 Insurance $73,000 Payroll and payroll taxes $185,000 Union benefits $37,500 Utilities $78,000 Repair $150,000 Supplies $30,000 Legal and accounting $25,000 Total expenses $765,500 Net Operating Income (NOI) $1,839,532 Purchase Price $26,279,029 (1839532/0.07) Property Asset value=(NOI)/(Capitalization Rate) 3 Calculation of Net Rent Net Operating Income $1,839,532 Income tax $515,069 (0.28*1839532) Net Rent $1,324,463 4 Annual Depreciation Depreciable basis $21,023,223 (0.8*26279029) Annual Depreciation $525,580.57 (21023223/40)

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