Assume that now in September of 2025, HOA dues for 2026 have been set as $165 per

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Question:

Assume that now in September of 2025, HOA dues for 2026 have been set as $165 per month. Annual insurance is $1,400 per year …and property taxes are now $2,800 annually. (Assume those all stay the same for 2026.) Assume you hire Snidely & Associates to manage the property for you. They charge 8% of the rents as their management fee. This is separate from the Lease-Up Fee which is equal to 1 month’s rent. (so you have two fees to Snidely. The Lease-up fee which is a one-time fee when they lease the property for you…and the Management fee, which is 8% of the rent each month that the home is under management.)

Allow for $400 per year in Maintenance/Repairs (including year 1). Also assume that since you are getting Snidely & Associates started marketing your home now (in September 2025) while you are still living in it…they will have you a tenant ready to move in January 1, 2026 paying $2,600 per month in rent. Assume that the tenant stays all year, with no vacancy. Assume you have no other expenses and make no other improvements or additions in 2025…and in 2026. Assume that the land value is 20% of the purchase price, and use a depreciable period of 27.5 years.

Complete the Investment Property Pro forma below so that you can determine what your expected 2026 cash flow will look like….if you keep this property as a rental property. Remember…in this Exam… before you enter a figure in an answer slot, round off to the nearest dollars…do not use cents.

Assume the HOA Dues, insurance and taxes are as stated immediately above: HOA Dues: $165 per mo.; Annual Insurance: $1,400; Annual Property Taxes: $2,800.

	Year 1
Potential Gross Revenue	-
less Vacancies	-
Rental Revenue	-
less Operating Expenses	-
NOI	-

IRS Books
NOI	-
less Interest Expense	-
less Depreciation Expense	-
Taxable income	-

Investor Books
NOI	-
less Debt Service	-
Before-tax Cash Flow	-
less Income Taxes	-
or plus Tax Savings	-
less Capital Expenditures	-
After-Tax Cash Flow	-