23-space/units - 2 Block Homes - 2 Duplexes 75% Occupied - Annual Leases - Long Term Tenants City Water - Septic Possible 3 additional spaces can be added Seller may consider offering Seller Financing to Qualified Purchaser Presented by benny@crescorpllc.com CRES Corp International, LLC 1228 E 7th Ave Tampa, Fl 33605
CRES Corp International, LLC Lakeland Court MHP Income, Expenses & Cash Flow Property Overview Potential Rental Income $ 171,756 Purchase/Asking Price $ 1,200,000 Property Type Mobile Home Parks Other Income - Improvements - No. of Units 29 Total Vacancy and Credits - Other - Price Per Unit $ 41,379 Operating Expenses $ (38,599) Closing Costs - Total Sq Ft - Annual Reserves: $ Finance Points - Price Per Sq Ft $ Net Operating Income (NOI) $ 133,157 Income per Unit $ 5,923 MIP Payments $ Total Acquisition Cost $ 1,200,000 Expenses per Unit $ (1,331) Annual Reserves: $ Debt Service: $ Mortgage (s) $ Cash Flow Before Taxes $ 133,157 Income Taxes: Benefit (Expense) @ 0% - Down Payment / Investment $ 1,200,000 Cash Flow After Taxes $ 133,157 Assumptions Loan Information % of Asking % of Cost Rental Growth Rate: 3.00% Down Payment: $ 1,200,000 100.00% 100.00% Expense Growth Rate: 2.00% Initial Loan Balance: $ 0.00% 0.00% Capitalization Rate (Resale): 11.10% Marginal Tax Rate: 0.00% Loan Amount Interest Rate Term Payment Capital Gain Tax Rate: 0.00% $ 8.00% 30 $0 $ 8.00% 30 $0 $ 8.00% 30 $0 Financial Measurements Year 1 Year 3 Year 7 Notes / Discussion Debt Coverage Ratio (DCR) - - - Loan-to-Value Ratio (LVR) 0.0% 0.0% 0.0% Capitalization Rate Based on Cost 11.10% 11.84% 13.47% Capitalization Rate Based on Resale Price 11.10% 11.10% 11.10% Gross Rent Multiplier 6.99 7.02 7.10 Net Present Value (NPV) - B/ Taxes Net Present Value (NPV) - A/Taxes 8.00% (10,384) 129,287 373,459 10.00% (32,014) 64,519 224,300 Cash on Cash Return - Before Taxes 11.10% 11.84% 13.47% Cash on Cash Return - After Taxes 11.10% 11.84% 13.47% Internal Rate of Return - Before Taxes 12.14% 13.61% Internal Rate of Return - After Taxes 12.14% 13.61% Modified Internal Rate of Return - Before Taxes Modified Internal Rate of Return - After Taxes 11.00% 10.58% 11.00% 10.58% Disclaimer: All information presented is believed to be accurate. The information, calculations and data presented in this report are believed to be accurate but are not guaranteed. The information contained in this report shall not be considered as a substitution for legal, accounting or other professional advice. Please seek proper legal and tax advice as appropriate before making investments.
Property Description Lakeland Court MHP The Lakeland Court park is located close to the Lakeland Mall with all the shopping and restaurants nearby. This magnificent park consists of: HIGHLIGHTS 29 Rentals - 23-space/Units 2 Block Homes & 2 Duplexes City Water - Septic Long Term Tenants - Annual Lease -2 Block Homes -2 Duplexes -23-spaces/MH Units 75% Occupied -GR = $171,756 -NOI = $133,157 The owners are using a rent ready Doublewide that can be leased for $850/mo. Also, they have completely refurnished a vacant unit from one of the duplexes that will capture $950. Just these two rentals will bring in $21,600/an gross revenue. Price: $1,200,000 Sellers may consider offering Seller Financing to a Qualified Purchaser. Feel free to contact me for further information. 75% Occupied CRES Corp International, LLC benny@crescorpllc.com 1228 E 7th Ave 0 Tampa, Fl 33605
Lakeland Court MHP Additional Land for 2-3 more spaces Duplex #1 Duplex Interior Duplex Interior Duplex #2
Rental Activity Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Rental Income $ 171,756 $ 176,909 $ 182,216 $ 187,682 $ 193,313 Less: Vacancy & Credit Losses - - - - - Effective Gross Income $ 171,756 $ 176,909 $ 182,216 $ 187,682 $ 193,313 Less: Operating Expenses (38,599) (39,371) (40,158) (40,962) (41,781) Net Operating Income (NOI) $ 133,157 $ 137,538 $ 142,058 $ 146,721 $ 151,532 Less: Annual Debt Service - - - - - CASH FLOW Before Taxes $ 133,157 $ 137,538 $ 142,058 $ 146,721 $ 151,532 Property Resale Analysis Projected Sales Price $ 1,199,613 $ 1,239,078 $ 1,279,798 $ 1,321,809 $ 1,365,154 Less: Selling Expenses (47,985) (49,563) (51,192) (52,872) (54,606) Adjusted Projected Sales Price $ 1,151,628 $ 1,189,515 $ 1,228,606 $ 1,268,937 $ 1,310,548 Less: Mortgage(s) Balance Payoff - - - - - SALE PROCEEDS Before Taxes $ 1,151,628 $ 1,189,515 $ 1,228,606 $ 1,268,937 $ 1,310,548 Cash Position Cash Generated in Current Year $ 133,157 $ 137,538 $ 142,058 $ 146,721 $ 151,532 Cash Generated in Previous Years n/a 133,157 270,695 412,752 559,473 Cash Generated from Property Sale 1,151,628 1,189,515 1,228,606 1,268,937 1,310,548 Original Initial Investment (1,200,000) (1,200,000) (1,200,000) (1,200,000) (1,200,000) Total Potential CASH Generated $ 84,785 $ 260,210 $ 441,358 $ 628,410 $ 821,553 Financial Measurements Capitalization Rate Based on Cost 11.10% 11.46% 11.84% 12.23% 12.63% Capitalization Rate Based on Resale Price 11.10% 11.10% 11.10% 11.10% 11.10% Gross Rent Monthly Multiplier (GRM) 83.84 84.05 84.28 84.51 84.74 Gross Rent Yearly Multiplier (GRM) 6.99 7.00 7.02 7.04 7.06 Value of Property Using this GRM 7.00 1,202,292 1,238,361 1,275,512 1,313,777 1,353,190 Break-Even Ratio 22.47% 22.25% 22.04% 21.82% 21.61% Operating Expense Ratio 22.47% 22.25% 22.04% 21.82% 21.61% Cash-on-Cash Return with Equity 7.07% 15.23% 15.23% 15.22% 15.22% Cash-on-Cash Return - Before Taxes 11.10% 11.46% 11.84% 12.23% 12.63% 10/10/2017 4:19 PM 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
Rental Activity Analysis Potential Rental Income Less: Vacancy & Credit Losses Effective Gross Income Less: Operating Expenses Net Operating Income (NOI) Year 6 Year 7 Year 8 Year 9 Year 10 $ 199,112 $ 205,086 $ 211,238 $ 217,575 $ 224,103 - - - - - $ 199,112 $ 205,086 $ 211,238 $ 217,575 $ 224,103 (42,616) (43,469) (44,338) (45,225) (46,129) $ 156,496 $ 161,617 $ 166,900 $ 172,350 $ 177,973 Less: Annual Debt Service CASH FLOW Before Taxes - - - - - $ 156,496 $ 161,617 $ 166,900 $ 172,350 $ 177,973 Property Resale Analysis Projected Sales Price Less: Selling Expenses Adjusted Projected Sales Price $ 1,409,873 $ 1,456,008 $ 1,503,604 $ 1,552,707 $ 1,603,363 (56,395) (58,240) (60,144) (62,108) (64,135) $ 1,353,478 $ 1,397,768 $ 1,443,460 $ 1,490,599 $ 1,539,228 Less: Mortgage(s) Balance Payoff SALE PROCEEDS Before Taxes - - - - - $ 1,353,478 $ 1,397,768 $ 1,443,460 $ 1,490,599 $ 1,539,228 Cash Position Cash Generated in Current Year Cash Generated in Previous Years Cash Generated from Property Sale Original Initial Investment Total Potential CASH Generated $ 156,496 $ 161,617 $ 166,900 $ 172,350 $ 177,973 711,005 867,501 1,029,118 1,196,018 1,368,369 1,353,478 1,397,768 1,443,460 1,490,599 1,539,228 (1,200,000) (1,200,000) (1,200,000) (1,200,000) (1,200,000) $ 1,020,979 $ 1,226,886 $ 1,439,478 $ 1,658,967 $ 1,885,570 Financial Measurements Capitalization Rate Based on Cost Capitalization Rate Based on Resale Price 13.04% 13.47% 13.91% 14.36% 14.83% 11.10% 11.10% 11.10% 11.10% 11.10% Gross Rent Monthly Multiplier (GRM) Gross Rent Yearly Multiplier (GRM) Value of Property Using this GRM 7.00 Break-Even Ratio Operating Expense Ratio 84.97 85.19 85.42 85.64 85.86 7.08 7.10 7.12 7.14 7.15 1,393,786 1,435,600 1,478,668 1,523,028 1,568,718 21.40% 21.20% 20.99% 20.79% 20.58% 21.40% 21.20% 20.99% 20.79% 20.58% Cash-on-Cash Return with Equity Cash-on-Cash Return - Before Taxes 15.22% 15.21% 15.21% 15.21% 15.20% 13.04% 13.47% 13.91% 14.36% 14.83% 10/10/2017 4:19 PM 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
Expense Description Annual Amount Annual Increase Per Unit Per Sq Ft % of % of Expenses Revenue Insurance Landscaping Maintenance Professional Fees Supplies Property Taxes Trash Removal Gas Electricity Miscellaneous 5,280 2.0% 182.07-13.7% 3.1% 3,000 2.0% 103.45-7.8% 1.7% 3,640 2.0% 125.52-9.4% 2.1% 195 2.0% 6.72-0.5% 0.1% 1,000 2.0% 34.48-2.6% 0.6% 9,864 2.0% 340.14-25.6% 5.7% 3,660 2.0% 126.21-9.5% 2.1% 4,800 2.0% 165.52-12.4% 2.8% 2,160 2.0% 74.48-5.6% 1.3% 5,000 2.0% 172.41-13.0% 2.9% Total Annual Operating Expenses $ 38,599 $ 1,331-100.0% 22.5%
Annual Property Operating Data 1 2 Year 1 Sq Ft Per Unit Year 2 Sq Ft Per Unit Year 3 Sq Ft Per Unit Year 4 Sq Ft Per Unit Year 5 Sq Ft Per Unit Potential Rental Income $ 171,756 0.00 493.55 $ 176,909 0.00 508.36 $ 182,216 0.00 523.61 $ 187,682 0.00 539.32 $ 193,313 0.00 555.50 Effective Gross Income $ 171,756 0.00 493.55 $ 176,909 0.00 508.36 $ 182,216 0.00 523.61 $ 187,682 0.00 539.32 $ 193,313 0.00 555.50 Operating Expenses Insurance 5,280 0.00 15.17 5,386 0.00 15.48 5,493 0.00 15.79 5,603 0.00 16.10 5,715 0.00 16.42 Landscaping 3,000 0.00 8.62 3,060 0.00 8.79 3,121 0.00 8.97 3,184 0.00 9.15 3,247 0.00 9.33 Maintenance 3,640 0.00 10.46 3,713 0.00 10.67 3,787 0.00 10.88 3,863 0.00 11.10 3,940 0.00 11.32 Professional Fees 195 0.00 0.56 199 0.00 0.57 203 0.00 0.58 207 0.00 0.59 211 0.00 0.61 Supplies 1,000 0.00 2.87 1,020 0.00 2.93 1,040 0.00 2.99 1,061 0.00 3.05 1,082 0.00 3.11 Property Taxes 9,864 0.00 28.34 10,061 0.00 28.91 10,263 0.00 29.49 10,468 0.00 30.08 10,677 0.00 30.68 Trash Removal 3,660 0.00 10.52 3,733 0.00 10.73 3,808 0.00 10.94 3,884 0.00 11.16 3,962 0.00 11.38 Gas 4,800 0.00 13.79 4,896 0.00 14.07 4,994 0.00 14.35 5,094 0.00 14.64 5,196 0.00 14.93 Electricity 2,160 0.00 6.21 2,203 0.00 6.33 2,247 0.00 6.46 2,292 0.00 6.59 2,338 0.00 6.72 Miscellaneous 5,000 0.00 14.37 5,100 0.00 14.66 5,202 0.00 14.95 5,306 0.00 15.25 5,412 0.00 15.55 Total Operating Expenses $ 38,599 0.00 110.92 $ 39,371 0.00 113.14 $ 40,158 0.00 115.40 $ 40,962 0.00 117.71 $ 41,781 0.00 120.06 Net Operating Income (NOI) $ 133,157 0.00 382.64 $ 137,538 0.00 395.22 $ 142,058 0.00 408.21 $ 146,721 0.00 421.61 $ 151,532 0.00 435.44 Cash Flow Before Taxes $ 133,157 0.00 382.64 $ 137,538 0.00 395.22 $ 142,058 0.00 408.21 $ 146,721 0.00 421.61 $ 151,532 0.00 435.44 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
Annual Property Operating Data 1 2 Year 6 Sq Ft Per Unit Year 7 Sq Ft Per Unit Year 8 Sq Ft Per Unit Year 9 Sq Ft Per Unit Year 10 Sq Ft Per Unit Potential Rental Income Effective Gross Income $ 199,112 0.00 572.16 $ 205,086 0.00 589.33 $ 211,238 0.00 607.01 $ 217,575 0.00 625.22 $ 224,103 0.00 643.97 $ 199,112 0.00 572.16 $ 205,086 0.00 589.33 $ 211,238 0.00 607.01 $ 217,575 0.00 625.22 $ 224,103 0.00 643.97 Operating Expenses Insurance Landscaping Maintenance Professional Fees Supplies Property Taxes Trash Removal Gas Electricity Miscellaneous Total Operating Expenses 5,830 0.00 16.75 5,946 0.00 17.09 6,065 0.00 17.43 6,186 0.00 17.78 6,310 0.00 18.13 3,312 0.00 9.52 3,378 0.00 9.71 3,446 0.00 9.90 3,515 0.00 10.10 3,585 0.00 10.30 4,019 0.00 11.55 4,099 0.00 11.78 4,181 0.00 12.01 4,265 0.00 12.26 4,350 0.00 12.50 215 0.00 0.62 220 0.00 0.63 224 0.00 0.64 228 0.00 0.66 233 0.00 0.67 1,104 0.00 3.17 1,126 0.00 3.24 1,149 0.00 3.30 1,172 0.00 3.37 1,195 0.00 3.43 10,891 0.00 31.29 11,108 0.00 31.92 11,331 0.00 32.56 11,557 0.00 33.21 11,788 0.00 33.87 4,041 0.00 11.61 4,122 0.00 11.84 4,204 0.00 12.08 4,288 0.00 12.32 4,374 0.00 12.57 5,300 0.00 15.23 5,406 0.00 15.53 5,514 0.00 15.84 5,624 0.00 16.16 5,736 0.00 16.48 2,385 0.00 6.85 2,433 0.00 6.99 2,481 0.00 7.13 2,531 0.00 7.27 2,581 0.00 7.42 5,520 0.00 15.86 5,631 0.00 16.18 5,743 0.00 16.50 5,858 0.00 16.83 5,975 0.00 17.17 $ 42,616 0.00 122.46 $ 43,469 0.00 124.91 $ 44,338 0.00 127.41 $ 45,225 0.00 129.96 $ 46,129 0.00 132.56 Net Operating Income (NOI) $ 156,496 0.00 449.70 $ 161,617 0.00 464.42 $ 166,900 0.00 479.60 $ 172,350 0.00 495.26 $ 177,973 0.00 511.42 Cash Flow Before Taxes $ 156,496 0.00 449.70 $ 161,617 0.00 464.42 $ 166,900 0.00 479.60 $ 172,350 0.00 495.26 $ 177,973 0.00 511.42 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
Cash Flow After Taxes Cash Flow Before Taxes $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ 1 2 3 4 5 6 7 8 9 10 Time Net Operating MIP Payments Debt Cash Flow Incomes Cash Flow Period Income Service Before Tax Taxes After Tax Int Investment $ (1,200,000) $ (1,200,000) Year 1 133,157 - - 133,157-133,157 Year 2 137,538 - - 137,538-137,538 Year 3 142,058 - - 142,058-142,058 Year 4 146,721 - - 146,721-146,721 Year 5 151,532 - - 151,532-151,532 Year 6 156,496 - - 156,496-156,496 Year 7 161,617 - - 161,617-161,617 Year 8 166,900 - - 166,900-166,900 Year 9 172,350 - - 172,350-172,350 Year 10 177,973 - - 177,973-177,973 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
After Taxes Before Taxes 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1 2 3 4 5 6 7 8 9 10 Time Initial Investment Cash Flow Cash on Cash Income Cash Flow Cash on Cash Period Adj for Refinance Before Taxes Before Taxes Taxes After Taxes After Taxes Year 1 $ 1,200,000 $ 133,157 11.10% $ $ 133,157 11.10% Year 2 1,200,000 137,538 11.46% - 137,538 11.46% Year 3 1,200,000 142,058 11.84% - 142,058 11.84% Year 4 1,200,000 146,721 12.23% - 146,721 12.23% Year 5 1,200,000 151,532 12.63% - 151,532 12.63% Year 6 1,200,000 156,496 13.04% - 156,496 13.04% Year 7 1,200,000 161,617 13.47% - 161,617 13.47% Year 8 1,200,000 166,900 13.91% - 166,900 13.91% Year 9 1,200,000 172,350 14.36% - 172,350 14.36% Year 10 1,200,000 177,973 14.83% - 177,973 14.83% 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1 2 3 4 5 6 7 8 9 10 Time Net Operating Cap Rate on Cost Resale Period Income (NOI) $ 1,200,000 Value Year 1 $ 133,157 11.10% $ 1,199,613 Year 2 137,538 11.46% 1,239,078 Year 3 142,058 11.84% 1,279,798 Year 4 146,721 12.23% 1,321,809 Year 5 151,532 12.63% 1,365,154 Year 6 156,496 13.04% 1,409,873 Year 7 161,617 13.47% 1,456,008 Year 8 166,900 13.91% 1,503,604 Year 9 172,350 14.36% 1,552,707 Year 10 177,973 14.83% 1,603,363 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
$1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 1 2 3 4 5 6 7 8 9 10 Time Projected Adj Projected Refi Proceeds Mortgage(s) Sale Proceeds Income Taxes Sale Proceeds Property Year / Year Period Resale Value Increase (if any) Balance Payoff Before Taxes From Sale After Taxes Equity Equity Increase Year 1 $ 1,151,628-4.03% $ $ $ 1,151,628 $ $ 1,151,628 $ 1,151,628 $ (48,372) Year 2 1,189,515 3.29% - - 1,189,515-1,189,515 1,189,515 37,887 Year 3 1,228,606 3.29% - - 1,228,606-1,228,606 1,228,606 39,091 Year 4 1,268,937 3.28% - - 1,268,937-1,268,937 1,268,937 40,331 Year 5 1,310,548 3.28% - - 1,310,548-1,310,548 1,310,548 41,611 Year 6 1,353,478 3.28% - - 1,353,478-1,353,478 1,353,478 42,930 Year 7 1,397,768 3.27% - - 1,397,768-1,397,768 1,397,768 44,290 Year 8 1,443,460 3.27% - - 1,443,460-1,443,460 1,443,460 45,692 Year 9 1,490,599 3.27% - - 1,490,599-1,490,599 1,490,599 47,138 Year 10 1,539,228 3.26% - - 1,539,228-1,539,228 1,539,228 48,629 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
Return on Equity (ROE) 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1 2 3 4 5 6 7 8 9 10 Required Return on Equity Time Period Rental Annual Change Annual Change Trapped Return on Hold Cash Flow in Equity in Net Worth Equity Equity (ROE) Sell 6.00% A B (A + B) Year 1 133,157 (48,372) 84,785 1,200,000 7.07% Hold After Year Year 2 137,538 37,887 175,425 1,151,628 15.23% Hold 5 Year 3 142,058 39,091 181,148 1,189,515 15.23% Hold Year 4 146,721 40,331 187,052 1,228,606 15.22% Hold Year 5 151,532 41,611 193,143 1,268,937 15.22% Hold Year 6 156,496 42,930 199,426 1,310,548 15.22% Hold Year 7 161,617 44,290 205,907 1,353,478 15.21% Hold Year 8 166,900 45,692 212,593 1,397,768 15.21% Hold Year 9 172,350 47,138 219,489 1,443,460 15.21% Hold Year 10 177,973 48,629 226,603 1,490,599 15.20% Hold 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
BreakEven Occupancy BreakEven Occupancy with Cash on Cash Requirment 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 4 5 6 7 8 9 10 Cash on Cash Time Period Potential Operating, Debt, Occupancy BreakEven Max Vacancy BreakEven Max Vacancy Requirement Rental Income Reserve Expenses Rate (Existing) Occupancy Rate BreakEven Rate Occupancy Rate BreakEven Rate 6.00% w/ Cash on Cash w/ Cash on Cash Year 1 171,756 (38,599) 100.00% 22.47% 77.53% 64.39% 35.61% Year 2 176,909 (39,371) 100.00% 22.25% 77.75% 62.95% 37.05% Year 3 182,216 (40,158) 100.00% 22.04% 77.96% 61.55% 38.45% Year 4 187,682 (40,962) 100.00% 21.82% 78.18% 60.19% 39.81% Year 5 193,313 (41,781) 100.00% 21.61% 78.39% 58.86% 41.14% Year 6 199,112 (42,616) 100.00% 21.40% 78.60% 57.56% 42.44% Year 7 205,086 (43,469) 100.00% 21.20% 78.80% 56.30% 43.70% Year 8 211,238 (44,338) 100.00% 20.99% 79.01% 55.07% 44.93% Year 9 217,575 (45,225) 100.00% 20.79% 79.21% 53.88% 46.12% Year 10 224,103 (46,129) 100.00% 20.58% 79.42% 52.71% 47.29% 1993-2014 Cash Flow Analyzer http://rentalsoftware.com
CRES Corp International, LLC CRES Corp International, LLC 1228 E 7th Ave 0 Tampa, Fl 33605 benny@crescorpllc.com Commercial Real Estate Services - Development - Management - Financial Services CRES Corp International, LLC (CCI) is a Commercial Real Estate company offering development, finance and brokerage services. Our Development Teamspecializes in health care construction and offers the latest and most cost effective construction technology. Our Development specializes in health care, medical, Multi-Family & Hospitality operations and development: Construction & Development Project Planning Property Acquisitions Investment Structuring Property Conversion and Repositioning Joint Venture Structuring Medical/Health Care Property Management Financial Arrangement & Consulting To assist our Clients with their development projects and acquisitions we offer affordable financing alternatives to conventional financing methods: Variable Rate Demand Bonds Industrial Revenue & Municipal Bonds Build-to Lease Program Foreign Investment Funds Joint Venture/Equity Partnership Arrangements Our goal is to bring our Clients the lowest interest rates and best leverage on their purchases and projects. We will consider the following properties and projects: Health Care/Medical Offices Multi-Family Schools/Universities Hospitality For further information contact or benny@crescorpllc.com
Terms & Definitions Net Operating Income (NOI) is a property s gross rental income reduced by all expenses except for loan payments, income taxes, mortgage insurance premium (MIP) payments and sometimes funded reserves. Debt Coverage Ratio (DCR) is a property s net operating income divided by the amount of debt payments. Lenders use this calculation to determine the remaining operating cash flow after the debt payments. Loan-to-Value Ratio (LTV) is the outstanding debt divided by the value of the property. This ratio is used to determine the amount of leverage and property equity. The debt balance can be the beginning or end-of-year balance. The property value used can be the contract price or the fair market value at the end of the year. Capitalization Rate (Cap Rate) is the net operating income (NOI) divided by either the property s contract purchase price or its fair market value. Cash-on-Cash Return is the net cash flow divided it by the initial investment (down payment). The calculation does not take into account the time value of money or change in the property s equity. Cash-on-Cash Return with Equity Build-up modifies the cash-on-cash return calculation by adding the property s net change in equity for that year to the numerator and adding all previously generated equity to the denominator of the cash-on-cash return ratio. The calculation calculates the return on the property equity, i.e. the return on the cash that is tied up in the property. Net Present Value (NPV) converts future dollars into present-day dollars by discounting (reducing) the future cash flow of a property by a given rate or percentage. The initial investment (down payment) is subtracted from the discounted dollars to derive the NPV. A positive NPV means that the property will generate a higher return than the given rate or percentage used to calculate the NPV amount. Gross Rent Multiplier (GRM) is a property s fair market value divided by its gross rental income. Mortgage Insurance Premium (MIP) Payments are insurance premiums charged by a lender to protect that lender against loss from a mortgager's default. The rates are charged on the balance of the loan and may be paid annually, monthly, or in some combination of the two (split premiums). Internal Rate-of-Return (IRR) is the most widely used method of valuing a property s annual cash flow stream. Since a property s cash flow is earned in the future, those future dollars must be converted to present-day dollars. The IRR calculation discounts (reduces) the property s future cash flow at a rate (i.e. percentage) so that the sum of all cash flow for a specified time period is equal to the initial investment. The rate or percentage needed to do that is the IRR. In other words, IRR is the discount rate at which Net Present Value (NPV) is zero. Modified Internal Rate-of-Return (MIRR) modifies the IRR to avoid the drawbacks of the traditional IRR. The IRR implicitly assumes that all cash flow is either reinvested or discounted at the computed IRR rate. In reality, a property s cash flow probably will not be reinvested at the computed IRR rate, but rather earn zero or a small amount of interest. The MIRR eliminates the reinvestment assumption by utilizing user stipulated reinvestment and borrowing rates. benny@crescorpllc.com CRES Corp International, LLC 1228 E 7th Ave 0 Tampa, Fl 33605