Calculate After Tax residual on sale, the Tax on Capital Gain, Tax on Recapture, NPV and IRR?
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EFFECTIVE DATE FOR VALUATION: January 1, 2021 PURCHASE PRICE: Improvements Land LONG-TERM FINANCING Loan Value Amortization Period $7,900,000 $5,530,000 $2,370,000 60% of purchase price 20 years 5 years 4.25% Monthly, rounded up to the next higher dollar 1.2 Term Interest Rate (2) Payments Minimum DCR There are no prepayment penalties on the loan. RENTAL INCOME PER ANNUM (Base Year - 2021) Market rents increase at 2% per annum. EXPENSES (Base Year - 2021) Property Taxes CAM Costs ALLOWANCES Vacancy and Collection Allowance Structural Allowance $115,000 $125,000 Tenant Improvements Free Rent - New Tenants Free Rent - Renewing Tenants 3.7% 2.0% of effective gross income COMMISSION PAYABLE AND TENANT INDUCEMENTS Commission - New Tenants Only Commission of 5% of the base rent in Year 1, 3% per annum thereafter over the term of the lease. Responsibility of the tenants 5 months' net rent free at beginning of lease 2 months' net rent free at beginning of lease REQUIRED RATE OF RETURN (AFTER-TAX) ON EQUITY: 9.5% MARGINAL INCOME TAX RATE: 48% The investors will qualify for tax on one-half of any capital gains. CAPITAL COST ALLOWANCE: 4% (Class 1) The investors will take the maximum possible CCA. MARKET OVERALL CAPITALIZATION RATE: 7% REVERSION RATE: In consideration of current market expectations and in discussion with a number of local and institutional purchasers who would be interested in acquiring a property similar to the subject, it is appropriate to add a risk premium of 0.5% to the market overall capitalization rate in determining the reversion value for the subject property. CLOSING COSTS: A 4 % commission of gross sale price is paid on sale. EFFECTIVE DATE FOR VALUATION: January 1, 2021 PURCHASE PRICE: Improvements Land LONG-TERM FINANCING Loan Value Amortization Period $7,900,000 $5,530,000 $2,370,000 60% of purchase price 20 years 5 years 4.25% Monthly, rounded up to the next higher dollar 1.2 Term Interest Rate (2) Payments Minimum DCR There are no prepayment penalties on the loan. RENTAL INCOME PER ANNUM (Base Year - 2021) Market rents increase at 2% per annum. EXPENSES (Base Year - 2021) Property Taxes CAM Costs ALLOWANCES Vacancy and Collection Allowance Structural Allowance $115,000 $125,000 Tenant Improvements Free Rent - New Tenants Free Rent - Renewing Tenants 3.7% 2.0% of effective gross income COMMISSION PAYABLE AND TENANT INDUCEMENTS Commission - New Tenants Only Commission of 5% of the base rent in Year 1, 3% per annum thereafter over the term of the lease. Responsibility of the tenants 5 months' net rent free at beginning of lease 2 months' net rent free at beginning of lease REQUIRED RATE OF RETURN (AFTER-TAX) ON EQUITY: 9.5% MARGINAL INCOME TAX RATE: 48% The investors will qualify for tax on one-half of any capital gains. CAPITAL COST ALLOWANCE: 4% (Class 1) The investors will take the maximum possible CCA. MARKET OVERALL CAPITALIZATION RATE: 7% REVERSION RATE: In consideration of current market expectations and in discussion with a number of local and institutional purchasers who would be interested in acquiring a property similar to the subject, it is appropriate to add a risk premium of 0.5% to the market overall capitalization rate in determining the reversion value for the subject property. CLOSING COSTS: A 4 % commission of gross sale price is paid on sale.
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Financial Analysis for Property Investment as of January 1 2021 This analysis helps us evaluate the potential profitability of the property investment Well calculate various metrics to understand its ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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