Investment strategy: Rental Property

The main home is a 2 bed 1 bath (1107 sq ft) and the mother-in-law suite is a 1 bed 1 bath (527 sq ft). The house can qualify for conventional financing.

Year built – Main home: 1925, Mother-in-law suite: 1980

Off Market Properties

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Purchase Price $ 170,000
Rent $ 2.000/mo
Monthly Cash Flow $ 754
Cash on Cash Return 25.84 %

Financial Analysis

Cash on Cash Return12.45 %
Internal Rate of Return (IRR)39.79 %
Capitalization Rate6.95 %
Gross Rent Multiplier (GRM)9.40
Debt-coverage Ratio (DCR)1.22
Operating Expense Ratio (OER)32.69 %
After Repair Value$ 141,000
Profit/Equity From Rehab$ 20,910

Operating Analysis

Rent$ 1,250/mo
Gross Operating Income (GOI)$ 14,550
Total Expenses$ 4,756
Net Operating Income (NOI)$ 9,794
Annual Debt Service$ 8,040
Cash Flow Before Taxes (CFBT)$ 1,754
Income Tax Liability$ 29
Cash Flow After Taxes (CFAT)$ 1,725

Financial Breakdown

Purchase Price$ 97,000
Purchase Costs$ 3,090
Repair/Construction Costs$ 20,000
Total Capital Needed$ 120,090
Financing$ 106,000
Total Cash Needed$ 14,090
Cash at Closing$ 1,590
Cash During Rehab$ 12,500

Purchase Price$ 97,000
Address3102 E Shadowlawn Ave , Tampa, 33610, FL
Year Built1971
Size1012 SF

Annual Property Operating Data

Incomes% of GOI
Gross Scheduled Income$ 15,000 
Total Gross Income$ 15,000 
Vacancy loss$ 450 
Gross Operating Income$ 14,550100.00 %
Property manager$ 1,45510.00 %
Insurance$ 1,0006.87 %
Repairs$ 1,0006.87 %
Property tax$ 1,3018.94 %
Total Expenses$ 4,75632.69 %
Net Operating Income$ 9,794 67.31 %

Cash Flow (Year 1)

Net Operating Income$ 9,79467.31 %
Annual Debt Service$ 8,04055.26 %
Cash Flow Before Taxes (CFBT)$ 1,75412.06 %
Income Tax Liability$ 290.20 
Cash Flow After Taxes (CFAT)$ 1,72511.85 %

Operating Ratios

Operating Expense Ratio32.69 %
Break-Even Ratio87.94 %

Financial Measures

Net Present Value$ 37,079
Internal Rate of Return39.79 %
Profitability Index3.63
Annual Depreciation$ 2,822

Holding period of 5 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 Return12.45 %
Return on Investment33.10 %
Capitalization Rate6.95 %
Gross Rental Yield15.46 %
Gross Rent Multiplier9.40

Financing% of ARV
Down Payment$ 00.00 %
BRRRR @ 75% LTV of ARV 141k$ 106,00075.18 %
Loan to Value Ratio 109.28 %
Loan to Cost Ratio 90.60 %
Debt Coverage Ratio 1.22
Loan Amount$ 106,000
Down payment (0%)$ 0
Amortization30 years
Interest Rate6.50 %
Monthly Payment$ 669.99

BRRRR @ 75% LTV of ARV 141k
Financing of: Specific amount ($ 106,000)

Operational Analysis
Gross Scheduled Income015,00015,30015,60615,91816,236
Vacancy Loss0450459468478487
Gross Operating Income014,55014,84115,13815,44115,749
Net Operating Income09,7949,99010,19010,39310,601
Loan Payment08,0408,0408,0408,0408,040
Payment Interest Part06,8556,7766,6916,6016,504
Payment Principal Part01,1851,2641,3491,4391,536
Cash Flow
Cash Flow Before Taxes-14,0901,7541,9502,1502,3542,561
Cash Flow After Taxes-14,0901,7251,8521,9812,1112,243

Note: All amounts in the table above are in $

Resale Price Evaluation Methods

The property is sold after 5 years.

Appreciation (3.00%)$ 163,458
Cap Rate (6.95%) & NOI$ 152,537
Gross Rent Multiplier$ 152,623

Sale Proceeds

Projected Selling Price$ 163,458
Costs of Sale (6.00%)$ 9,807
1. Loan Balance Payoff$ 99,228
Net Sale Proceeds Before Tax$ 54,423

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, and are different in every country.

Net Assets and Yield

Net Assets
Sale Proceeds Before Tax$ 54,423
Investor Cash Outlay$ 14,090
Net Assets$ 40,333
Average Yield 
Annual Net Assets$ 8,067
Average Cash Flow (After Taxes)$ 1,534
Average Annual Gain (After Taxes)$ 9,600
Average Annual Yield (After Taxes)9.90 %