Boston’s Income Property Specialist

Executive Investment Summary

Property Information

Type Multi-Family No. of Units 3

Purchase Price $ 460,000 Price Per Unit $153,333
Appreciation Rate 5.00% Total Square Feet 3,900
Fair Market Value $ 500,000 Price Per Sq. Ft. $ 118

See notes on page 4 for further explanations

Financing

% of Asking % of Cost
Down Payment: $ 190,000 42.22% 41.30%
Initial Loan Balance: $ 270,000 60.00% 58.70%

Loan Amount Interest Rate Term Payment

$ 270,000 7.00% 30 $ 1,796

Income & Expenses

Monthly Rents: $ 4,500

Annual Rents: $ 54,000
Other Annual Income: $
Annual Vacancy: $ (2,700)
Annual Expenses: $(18,680)
Annual Reserves: $
MIP Payments $
Annual Debt Service: $(19,759)
Net Operating Income (NOI) $ 32,620

Assumptions:

Rental Growth Rate: 2.50%

Expense Growth Rate: 1.00%
Appreciation Rate 2.50%
Marginal Tax Rate: 34.00%
Capital Gain Tax Rate: 21.00%

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Financial Measures
Year 1 Year 5 Year 10
Debt Coverage Ratio (DCR) 1.65 1.71 2.00
Loan-to-Value Ratio (LVR) 52.2% 45.0% 36.3%

Capitalization Rate Based on Cost 7.09% 8.03% 9.36%

Capitalization Rate Based on Resale Price 6.36% 6.53% 6.73%

Net Present Value (NPV) - B/ Taxes 13.50% 10,103 3,721 (4,890)

Net Present Value (NPV) - A/Taxes 10.00% 7,877 6,270 6,720

Cash on Cash Return - Before Taxes 6.77% 8.10% 11.31%

Cash on Cash Return - After Taxes 6.05% 6.82% 8.67%

Internal Rate of Return Before Taxes 13.99% 13.12%

Internal Rate of Return After Taxes 10.79% 10.48%

Modified Internal Rate of Return Before Taxes 12.68% 10.85%

Modified Internal Rate of Return After Taxes 9.82% 8.71%

Executive Summary Notes:

The initial purchase price of $460,000 includes a property cost of $270,000 ($30,000 below it’s FMV of
$300,000), $180,000 in renovations (which will yield $200,000 in increased value) and an estimated $10,
000 in closing cost and fees.

Cost = $270 (Property) + $180 (Renovations) + $10 (Closing /Fees) = $460

Value = $300 (Property) + $200 (Renovations) = $500

Total value of $500,000 minus a total cost of $460,000 = $40,000 initial equity.

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Rental Growth & Net Rent Amounts

Vacancy
Year Gross Rent Vacancy Amount Net Rent
Rate

Year 1 $ 54,000 5.00% $ 2,700 $ 51,300

Year 2 55,350 5.00% 2,768 52,583
Year 3 56,734 5.00% 2,837 53,897
Year 4 58,152 5.00% 2,908 55,244
Year 5 59,606 5.00% 2,980 56,626
Year 6 61,096 5.00% 3,055 58,041
Year 7 62,623 5.00% 3,131 59,492
Year 8 64,189 5.00% 3,209 60,980
Year 9 65,794 5.00% 3,290 62,504
Year 10 67,439 5.00% 3,372 64,067

Chart assumes a 2.5% annual increase in rental income

Property Appreciation
Initial FMV
Year Annual Rate
$ 500,000
Year 1 2.50% $ 512,500
Year 2 2.50% 525,313
Year 3 2.50% 538,445
Year 4 2.50% 551,906
Year 5 2.50% 565,704
Year 6 2.50% 579,847
Year 7 2.50% 594,343
Year 8 2.50% 609,201
Year 9 2.50% 624,431
Year 10 2.50% 640,042

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Cash Flow Analysis

Rental Activity Analysis Year 1 Year 2 Year 3 Year 4 Year 5
Potential Rental Income $ 54,000 $ 55,350 $ 56,734 $ 58,152 $ 59,606
Other Income - - - - -
Less: Vacancy & Credit Losses (2,700) (2,768) (2,837) (2,908) (2,980)
Less: Funded Reserves - - - - -
Less: Operating Expenses (18,680) (18,924) (19,171) (19,422) (19,677)
Net Operating Income (NOI) $ 32,620 $ 33,659 $ 34,726 $ 35,822 $ 36,948

Less: Annual Debt Service (19,759) (21,556) (21,556) (21,556) (21,556)

Less: MIP Payments - - - - -
Less: Funded Reserves - - - - -
CASH FLOW Before Taxes $ 12,861 $ 12,103 $ 13,170 $ 14,267 $ 15,392
Income Taxes: Benefit (Expense) (1,374) (1,091) (1,526) (1,975) (2,441)
CASH FLOW After Taxes $ 11,486 $ 11,012 $ 11,645 $ 12,291 $ 12,951

Property Resale Analysis

Projected Sales Price $ 512,500 $ 525,313 $ 538,445 $ 551,906 $ 565,704
Projected Sale Price - Improvements - - - - -
Less: Selling Expenses (30,750) (31,519) (32,307) (33,114) (33,942)
Adjusted Projected Sales Price $ 481,750 $ 493,794 $ 506,139 $ 518,792 $ 531,762

Less: Mortgage(s) Balance Payoff (267,493) (264,569) (261,434) (258,072) (254,467)

SALE PROCEEDS Before Taxes $ 214,257 $ 229,224 $ 244,705 $ 260,720 $ 277,295
Tax Benefit from Suspended Losses (if any) - - - - -
Income Taxes from Sale: Benefit (Expense) (8,078) (14,271) (20,527) (26,848) (33,236)
SALE PROCEEDS After Taxes $ 206,178 $ 214,953 $ 224,177 $ 233,872 $ 244,059

Cash Position
Cash Generated in Current Year $ 11,486 $ 11,012 $ 11,645 $ 12,291 $ 12,951
Cash Generated in Previous Years n/a 11,486 22,499 34,143 46,434
Cash Generated from Property Sale 206,178 214,953 224,177 233,872 244,059
Cash Inflow (Outflow) from Refinancing - - - - -
Original Initial Investment (190,000) (190,000) (190,000) (190,000) (190,000)
Total Potential CASH Generated $ 27,665 $ 47,452 $ 68,320 $ 90,306 $ 113,445

Financial Measures
Debt Coverage Ratio (DCR) 1.65 1.56 1.61 1.66 1.71
Loan-to-Value Ratio (LVR) 52.2% 50.4% 48.6% 46.8% 45.0%

Capitalization Rate Based on Cost 7.09% 7.32% 7.55% 7.79% 8.03%

Capitalization Rate Based on Resale Price 6.36% 6.41% 6.45% 6.49% 6.53%
Value of Property Using this Cap Rate 420,903 434,310 448,080 462,224 476,751

Gross Rent Monthly Multiplier (GRM) 100.00 113.89 113.89 113.89 113.89
Gross Rent Yearly Multiplier (GRM) 8.33 9.49 9.49 9.49 9.49
Value of Property Using this GRM 648,000 664,200 680,805 697,825 715,271

Net Present Value (NPV) - Before Taxes 10,103 8,664 7,095 5,436 3,721
Net Present Value (NPV) - After Taxes 7,877 7,190 6,720 6,425 6,270

Cash-on-Cash Return on Equity 14.56% 9.60% 9.71% 9.81% 9.89%

Cash-on-Cash Return - Before Taxes 6.77% 6.37% 6.93% 7.51% 8.10%
Cash-on-Cash Return - After Taxes 6.05% 5.80% 6.13% 6.47% 6.82%

Internal Rate-of-Return (IRR) - Before Taxes 19.54% 16.14% 14.98% 14.37% 13.99%
Internal Rate-of-Return (IRR) - After Taxes 14.56% 12.12% 11.35% 10.99% 10.79%

Modified Internal Rate-of-Return (MIRR) - Before Taxes 19.54% 15.66% 14.18% 13.30% 12.68%
Modified Internal Rate-of-Return (MIRR) - After Taxes 14.56% 11.79% 10.78% 10.21% 9.82%

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Cash Flow Analysis (continued)

Rental Activity Analysis Year 6 Year 7 Year 8 Year 9 Year 10
Potential Rental Income $ 61,096 $ 62,623 $ 64,189 $ 65,794 $ 67,439
Other Income - - - - -
Less: Vacancy & Credit Losses (3,055) (3,131) (3,209) (3,290) (3,372)
Less: Funded Reserves - - - - -
Less: Operating Expenses (19,937) (20,200) (20,468) (20,740) (21,017)
Net Operating Income (NOI) $ 38,104 $ 39,292 $ 40,512 $ 41,764 $ 43,050

Less: Annual Debt Service (21,556) (21,556) (21,556) (21,556) (21,556)

Less: MIP Payments - - - - -
Less: Funded Reserves - - - - -
CASH FLOW Before Taxes $ 16,549 $ 17,736 $ 18,956 $ 20,208 $ 21,494
Income Taxes: Benefit (Expense) (2,923) (3,421) (3,938) (4,473) (5,027)
CASH FLOW After Taxes $ 13,626 $ 14,315 $ 15,018 $ 15,735 $ 16,467

Property Resale Analysis

Projected Sales Price $ 579,847 $ 594,343 $ 609,201 $ 624,431 $ 640,042
Projected Sale Price - Improvements - - - - -
Less: Selling Expenses (34,791) (35,661) (36,552) (37,466) (38,403)
Adjusted Projected Sales Price $ 545,056 $ 558,682 $ 572,649 $ 586,966 $ 601,640

Less: Mortgage(s) Balance Payoff (250,601) (246,456) (242,012) (237,246) (232,135)

SALE PROCEEDS Before Taxes $ 294,454 $ 312,226 $ 330,638 $ 349,720 $ 369,505
Tax Benefit from Suspended Losses (if any) - - - - -
Income Taxes from Sale: Benefit (Expense) (39,691) (46,216) (52,813) (59,483) (66,228)
SALE PROCEEDS After Taxes $ 254,764 $ 266,010 $ 277,825 $ 290,237 $ 303,277

Cash Position
Cash Generated in Current Year $ 13,626 $ 14,315 $ 15,018 $ 15,735 $ 16,467
Cash Generated in Previous Years 59,386 73,012 87,327 102,344 118,079
Cash Generated from Property Sale 254,764 266,010 277,825 290,237 303,277
Cash Inflow (Outflow) from Refinancing - - - - -
Original Initial Investment (190,000) (190,000) (190,000) (190,000) (190,000)
Total Potential CASH Generated $ 137,775 $ 163,336 $ 190,169 $ 218,317 $ 247,823

Financial Measures
Debt Coverage Ratio (DCR) 1.77 1.82 1.88 1.94 2.00
Loan-to-Value Ratio (LVR) 43.2% 41.5% 39.7% 38.0% 36.3%

Capitalization Rate Based on Cost 8.28% 8.54% 8.81% 9.08% 9.36%

Capitalization Rate Based on Resale Price 6.57% 6.61% 6.65% 6.69% 6.73%
Value of Property Using this Cap Rate 491,671 506,993 522,729 538,890 555,485

Gross Rent Monthly Multiplier (GRM) 113.89 113.89 113.89 113.89 113.89
Gross Rent Yearly Multiplier (GRM) 9.49 9.49 9.49 9.49 9.49
Value of Property Using this GRM 733,153 751,481 770,268 789,525 809,263

Net Present Value (NPV) - Before Taxes 1,978 229 (1,508) (3,218) (4,890)
Net Present Value (NPV) - After Taxes 6,228 6,271 6,379 6,534 6,720

Cash-on-Cash Return on Equity 9.97% 10.03% 10.09% 10.13% 10.17%

Cash-on-Cash Return - Before Taxes 8.71% 9.33% 9.98% 10.64% 11.31%
Cash-on-Cash Return - After Taxes 7.17% 7.53% 7.90% 8.28% 8.67%

Internal Rate-of-Return (IRR) - Before Taxes 13.72% 13.52% 13.36% 13.23% 13.12%
Internal Rate-of-Return (IRR) - After Taxes 10.67% 10.60% 10.54% 10.51% 10.48%

Modified Internal Rate-of-Return (MIRR) - Before Taxes 12.19% 11.78% 11.43% 11.12% 10.85%
Modified Internal Rate-of-Return (MIRR) - After Taxes 9.51% 9.27% 9.06% 8.87% 8.71%

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Annual Property Operating Data

Year 1 % Year 2 % Year 3 % Year 4 %

Potential Rental Income $ 54,000 105.26% $ 55,350 105.26% $ 56,734 105.26% $ 58,152 105.26%
Less: Vacancy & Credit Losses (2,700) -5.26% (2,768) -5.26% (2,837) -5.26% (2,908) -5.26%
0.00% 0.00% 0.00% 0.00%
Effective Rental Income $ 51,300 100.00% $ 52,583 100.00% $ 53,897 100.00% $ 55,244 100.00%
Other Income - 0.00% - 0.00% - 0.00% - 0.00%
Gross Operating Income $ 51,300 100.00% $ 52,583 100.00% $ 53,897 100.00% $ 55,244 100.00%

Operating Expenses
Accounting 2,000 3.90% 2,020 3.84% 2,040 3.79% 2,061 3.73%
Advertising 100 0.19% 101 0.19% 102 0.19% 103 0.19%
Association Fees - 0.00% - 0.00% - 0.00% - 0.00%
Auto & Travel - 0.00% - 0.00% - 0.00% - 0.00%
Cleaning 100 0.19% 101 0.19% 102 0.19% 103 0.19%
Commissions - 0.00% - 0.00% - 0.00% - 0.00%
Insurance 2,500 4.87% 2,525 4.80% 2,550 4.73% 2,576 4.66%
Landscaping 300 0.58% 303 0.58% 306 0.57% 309 0.56%
Legal 1,000 1.95% 1,010 1.92% 1,020 1.89% 1,030 1.86%
Maintenance 500 0.97% 505 0.96% 510 0.95% 515 0.93%
Management Fee 3,780 7.37% 3,875 7.37% 3,971 7.37% 4,071 7.37%
On-Site Management - 0.00% - 0.00% - 0.00% - 0.00%
Payroll - 0.00% - 0.00% - 0.00% - 0.00%
Pest Control - 0.00% - 0.00% - 0.00% - 0.00%
Professional Fees 500 0.97% 505 0.96% 510 0.95% 515 0.93%
Repairs 1,000 1.95% 1,010 1.92% 1,020 1.89% 1,030 1.86%
Supplies 500 0.97% 505 0.96% 510 0.95% 515 0.93%
Taxes: 0.00% 0.00% 0.00% 0.00%
Property Taxes 4,500 8.77% 4,545 8.64% 4,590 8.52% 4,636 8.39%
Personal Property - 0.00% - 0.00% - 0.00% - 0.00%
Payroll - 0.00% - 0.00% - 0.00% - 0.00%
Other - 0.00% - 0.00% - 0.00% - 0.00%
Trash Removal - 0.00% - 0.00% - 0.00% - 0.00%
Utilities: 0.00% 0.00% 0.00% 0.00%
Gas 200 0.39% 202 0.38% 204 0.38% 206 0.37%
Electricity 200 0.39% 202 0.38% 204 0.38% 206 0.37%
Telephone - 0.00% - 0.00% - 0.00% - 0.00%
Water 1,500 2.92% 1,515 2.88% 1,530 2.84% 1,545 2.80%
Other Utilities - 0.00% - 0.00% - 0.00% - 0.00%
Miscellaneous - 0.00% - 0.00% - 0.00% - 0.00%
One-Time Expenses - 0.00% - 0.00% - 0.00% - 0.00%
0.00% 0.00% 0.00%
Total Operating Expenses $ 18,680 36.41% $ 18,924 35.99% $ 19,171 35.57% $ 19,422 35.16%

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Annual Property Operating Data (Continued)

Year 5 % Year 6 % Year 7 % Year 8 %

Potential Rental Income $ 59,606 105.26% $ 61,096 105.26% $ 62,623 105.26% $ 64,189 105.26%
Less: Vacancy & Credit Losses (2,980) -5.26% (3,055) -5.26% (3,131) -5.26% (3,209) -5.26%
0.00% 0.00% 0.00% 0.00%
Effective Rental Income $ 56,626 100.00% $ 58,041 100.00% $ 59,492 100.00% $ 60,980 100.00%
Other Income - 0.00% - 0.00% - 0.00% - 0.00%
Gross Operating Income $ 56,626 100.00% $ 58,041 100.00% $ 59,492 100.00% $ 60,980 100.00%

Operating Expenses
Accounting 2,081 3.68% 2,102 3.62% 2,123 3.57% 2,144 3.52%
Advertising 104 0.18% 105 0.18% 106 0.18% 107 0.18%
Association Fees - 0.00% - 0.00% - 0.00% - 0.00%
Auto & Travel - 0.00% - 0.00% - 0.00% - 0.00%
Cleaning 104 0.18% 105 0.18% 106 0.18% 107 0.18%
Commissions - 0.00% - 0.00% - 0.00% - 0.00%
Insurance 2,602 4.59% 2,628 4.53% 2,654 4.46% 2,680 4.40%
Landscaping 312 0.55% 315 0.54% 318 0.54% 322 0.53%
Legal 1,041 1.84% 1,051 1.81% 1,062 1.78% 1,072 1.76%
Maintenance 520 0.92% 526 0.91% 531 0.89% 536 0.88%
Management Fee 4,172 7.37% 4,277 7.37% 4,384 7.37% 4,493 7.37%
On-Site Management - 0.00% - 0.00% - 0.00% - 0.00%
Payroll - 0.00% - 0.00% - 0.00% - 0.00%
Pest Control - 0.00% - 0.00% - 0.00% - 0.00%
Professional Fees 520 0.92% 526 0.91% 531 0.89% 536 0.88%
Repairs 1,041 1.84% 1,051 1.81% 1,062 1.78% 1,072 1.76%
Supplies 520 0.92% 526 0.91% 531 0.89% 536 0.88%
Taxes: 0.00% 0.00% 0.00% 0.00%
Property Taxes 4,683 8.27% 4,730 8.15% 4,777 8.03% 4,825 7.91%
Personal Property - 0.00% - 0.00% - 0.00% - 0.00%
Payroll - 0.00% - 0.00% - 0.00% - 0.00%
Other - 0.00% - 0.00% - 0.00% - 0.00%
Trash Removal - 0.00% - 0.00% - 0.00% - 0.00%
Utilities: 0.00% 0.00% 0.00% 0.00%
Gas 208 0.37% 210 0.36% 212 0.36% 214 0.35%
Electricity 208 0.37% 210 0.36% 212 0.36% 214 0.35%
Telephone - 0.00% - 0.00% - 0.00% - 0.00%
Water 1,561 2.76% 1,577 2.72% 1,592 2.68% 1,608 2.64%
Other Utilities - 0.00% - 0.00% - 0.00% - 0.00%
Miscellaneous - 0.00% - 0.00% - 0.00% - 0.00%
One-Time Expenses - 0.00% - 0.00% - 0.00% - 0.00%
0.00% 0.00% 0.00% 0.00%
Total Operating Expenses $ 19,677 33.01% $ 19,937 34.35% $ 20,200 33.95% $ 20,468 33.57%

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Annual Property Operating Data (Continued)

Year 9 % Year 10 %

Potential Rental Income $65,794 105.26% $67,439 105.26%

Less: Vacancy & Credit Losses (3,290) -5.26% (3,372) -5.26%
0.00% 0.00%
Effective Rental Income $62,504 100.00% $64,067 100.00%
Other Income - 0.00% - 0.00%
Gross Operating Income $62,504 100.00% $64,067 100.00%

Operating Expenses
Accounting 2,166 3.46% 2,187 3.41%
Advertising 108 0.17% 109 0.17%
Association Fees - 0.00% - 0.00%
Auto & Travel - 0.00% - 0.00%
Cleaning 108 0.17% 109 0.17%
Commissions - 0.00% - 0.00%
Insurance 2,707 4.33% 2,734 4.27%
Landscaping 325 0.52% 328 0.51%
Legal 1,083 1.73% 1,094 1.71%
Maintenance 541 0.87% 547 0.85%
Management Fee 4,606 7.37% 4,721 7.37%
On-Site Management - 0.00% - 0.00%
Payroll - 0.00% - 0.00%
Pest Control - 0.00% - 0.00%
Professional Fees 541 0.87% 547 0.85%
Repairs 1,083 1.73% 1,094 1.71%
Supplies 541 0.87% 547 0.85%
Taxes: 0.00% 0.00%
Property Taxes 4,873 7.80% 4,922 7.68%
Personal Property - 0.00% - 0.00%
Payroll - 0.00% - 0.00%
Other - 0.00% - 0.00%
Trash Removal - 0.00% - 0.00%
Utilities: 0.00% 0.00%
Gas 217 0.35% 219 0.34%
Electricity 217 0.35% 219 0.34%
Telephone - 0.00% - 0.00%
Water 1,624 2.60% 1,641 2.56%
Other Utilities - 0.00% - 0.00%
Miscellaneous - 0.00% - 0.00%
One-Time Expenses - 0.00% - 0.00%
0.00% 0.00%
Total Operating Expenses $20,740 33.18% $21,017 32.80%

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As a life long resident of the Boston area Willie is very

familiar with the city’s neighborhoods and has a deep
understanding of Boston’s real estate market. Willie
attended Northeastern University and earned his
bachelors degree in Business, Finance. He’s spent several
years working in the Banking and Financial Services
industries, and gained valuable experience evaluating the
risks & returns of various investment assets, including
real estate. Along with being a licensed investment
advisor, Willie is also Founder & CEO of The Mandrell
Company, a firm dedicated to assisting local rental
owners in running an efficient and profitable rental
property business.

Willie James Mandrell, III

Realtor, Notary Public P: 617-297-8641
F: 617-849-5679
Willie@WJMandrell.com
www.WJMANDRELL.com

Twitter: www.twitter.com/wjmandrell
Facebook: www.facebook.com/wmandrell
Multi-Family Blog: www.WillieMandrell.com
Linked In: www.linkedin.com/in/WJMandrell

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