5 years ago, you purchased the Tip Top Retail Center. At that time, you paid $2,000,000 for the property and obtained a loan in the amount of $1,500,000.

Currently the retail center has annual rental revenue of $225,000 and operating expenses of $65,000. Annual debt service on your loan is $116,000.

You've been approached by a buyer who has offered you $2,400,000 for the property. If you sold the property, you would pay 6% in commissions and closing costs. The current loan balance is $1,500,000. To decide if you should take the offer, you post a keep vs. sale analysis.

a) What is the operating cash flow after debt service?
b) What is the amount of investable equity, or investment base?
c) Based on a) and b), what is your return on investible equity?
d) What metric or key factor should you know to decide to keep or sell the property?

Answer rating: 100% (QA)

a The operating cash flow after debt service can be calculated as follows Operating income Rental re... View the full answer