Assignment

Subject Property

This is a Class B duplex in Gainesville that you plan to renovate before leasing out to students in order to command higher rents. You did your research and project the renovations to cost you $$6,500$ per unit in year $1.$ You can purchase the property for $$175,000$ today and you believe that the total combined rent will be $$1,745$ a month for the entire property with a $12$ month lease. You also believe that your rent will grow at a constant yearly rate of $1\mathrm{.}5\%$ and project that you will have vacancy and collection losses of $3\%$ annually since you secured creditable tenants. Both tenants will be charged $$50$ a month for their parking spot, maintenance and utilities will cost you $$4,000$ annually, and the operating expenses will grow at $2\%$ yearly. Based on your assumptions you can sell your property in $5$ years for $$225,000.$ You expect there to be selling expenses of $6\%.$ You will not invest in this property unless you can realize an unlevered before tax return of $10\%,$ a levered before tax return of $14\%,$ and a levered after tax return of $9\mathrm{.}8\%,$ You would like to acquire the property with $60\%$ financed by ABC Bank with a $15-$year fixed interest rate loan at $3\mathrm{.}5\%$ per year. You also negotiate to only pay interest for the six months. You will have to pay $3\%$ in loan expenses and you plan on using an amortization term of $30$ years making this a fixed rate partially amortized loan with an interest only period. Your yearly taxes will be $$3,750$ and you will have taxes due on sale of $4\%$ on the property. Once you complete the model please provide EXCel formulas so I know how to approach this problem.

Amortization Table goes from row $14$ to row $194.$