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SELLER'S STATEMENT |
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Property Facts |
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Sitting on Money is losing money |
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Diminishing Equity Assessment |
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Need a table to easily show the comparison situation to demonstrate higher rate of return utilizing appropriate leverage |
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Most Sellers do NOT raise rents causing the correlation of |
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Leveraging wit lower interest rates will give investor better return |
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Equity to Cash Flow to become low (Diminishing R.O.E.) |
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Address |
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33 Cooler Way |
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City, Ca |
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Gross Building Area |
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Land Area |
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Parking Ratio |
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Coverage |
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Yr., Built |
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Ownership Type |
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Occupancy |
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Purchase Date |
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6/1/2005 |
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Purchase Price |
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$3,500,000 |
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Maximum Purchase Price = Max. Equity Investment + Max. Loan Amount. |
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Plus Acquisition Costs |
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Plus Loan Fees / Costs |
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Project Cost: |
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CAP |
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SEE CCIM TOOLS |
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NOI |
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Required ROI |
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10.0% |
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Return on Investment = NOI / Project Cost |
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Required ROE (Cash on Cash Return) |
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7.5% |
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Return on Equity = Cash Flow / Maximum Equity Investment |
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Original Equity / Down Payment |
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Maximum Equity Investment = CF (before taxes) / Reqd. ROE |
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; ROE aka Cash On Cash |
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Loan |
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LTV |
7.5% |
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DCR |
1.25% |
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DCR = NOI / Max. ADS |
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Amort. Schedule |
25 |
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Max. Loan Amt. |
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Maximum Loan Amount = ADS / Constant |
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Term |
10 Years |
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Interest |
4.65% |
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Constant |
4.03% |
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Constant = ADS / Loan Amount |
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Ann. Debt Service (ADS) |
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Maximum Annual Debt Service = NOI / DCR |
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Mo. Pmt. |
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Current Annual Operating Return |
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EFFECTIVE GROSS INCOME |
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$250,000 |
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Less: Absorption & Turnover Vacancy |
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Less: Relocation Costs |
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Less: Downtime, Concession, Base Rent Abatements |
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Scheduled Gross Income |
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Plus: Percentage Rent(s) Revenue |
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Plus: Misc. Revenue - Parking, Mon. Sign, Wall Sign, ATM, Cell Tower, Charging Station, Kiosk, etc. |
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Plus: Recoverable Operating Expenses |
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Potential Gross Income |
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Less: Vacancy Reserve |
0.05 |
(12,500) |
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ref. Property Mgmt.. Financial Reports |
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GROSS OPERATING INCOME |
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237,500 |
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Less: Operating Expenses |
0.35 |
(87,500) |
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ref. Property Mgmt.. Financial Reports |
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Monitor exclusions: |
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Real Estate Taxes - Property Insurance - CAM Charges - Mgmt. Fee |
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Less: Taxes |
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NET OPERATING INCOME |
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150,000 |
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Off Site Mgmt. - Payroll - Expenses / Benefits - Taxes / Workers Comp. |
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Less: Leasing & Capital Improvement Expenses |
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Equipment - Repairs & Maint.. - Utilities - Security - Covid Expenses |
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Less: Debt Service |
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(43,449) |
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ref. Owner's Mortgage Stmt. |
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Accounting & Legal - Licenses & Permits - Advertising - Supplies |
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Pre-Tax Cash Flow |
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106,551 |
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NOI / DCR = Maximum Annual Debt Service |
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Personal Property Taxes - Misc. Contract Services |
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Tax (Payable) / Receivable |
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(12,262) |
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DCR = NOI / Annual Debt Service |
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After Tax Cash Flow |
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94,289 |
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Equity Build-Up (Principal Reduction) |
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6,890 |
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ref. Owner's Mortgage Stmt. |
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Total After Tax Return |
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101,179 |
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Gross Operating Income |
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237,500 |
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Loan Interest |
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-36,560 |
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ref. Owner's Mortgage Stmt. |
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Expenses |
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(87,500) |
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Depreciation |
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-76282 |
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Taxable Income (Loss) |
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37,158 |
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Tax Bracket Assumed |
0.33 |
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Owner input |
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Tax (Payable) / Receivable |
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12,262 |
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Seller's Net Proceeds |
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CASH GENERATED FROM SALE |
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$5,000,000 |
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New Loan Balance |
0.5 |
$2,500,000 |
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Value based upon current market rentals and cap rates - Lease Survey |
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Existing Loan Balance |
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$402,434 |
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ref. Owner's Mortgage Stmt. |
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Net Loan Funds Generated |
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$2,097,566 |
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Interest in Advance at COE |
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0 |
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Cash Down Payment |
0.3 |
$1,500,000 |
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Other |
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TOTAL CASH GENERATED FROM SALE |
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$3,597,566 |
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EXPENSE OF SALE |
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If 1 M |
If 5 M |
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Title Policy |
0.04 |
($5,000) |
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3,500 |
7,500 |
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Escrow Fee |
0.02 |
($2,500) |
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2,500 |
5,000 |
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split 50/50 between buyer and seller |
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Commission |
0.04 |
($200,000) |
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Other |
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1,000 |
2500 |
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TOTAL EXPENSE OF SALE |
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($207,500) |
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NET CASH TO SELLER |
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$3,390,066 |
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NOTES RECEIVABLE |
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TOTAL INTEREST RECEIVED FROM NOTE |
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TOTAL NET PROCEEDS TO SELLER (Not including Note Interest) |
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Seller's Rate of Return On New Equity |
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Price |
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$5,000,000 |
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Equity (NET of Selling Expense) |
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$3,390,066 |
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Amount |
Type |
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Rate of Return |
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106,551 |
PRE - TAX CASH FLOW |
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3.14% |
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94,289 |
AFTER TAX CASH FLOW |
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2.78% |
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6,890 |
EQUITY BUILD-UP (Principal Reduction) |
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0.20% |
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101,179 |
TOTAL AFTER - TAX RETURN (R.O.E.) |
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2.98% |
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