You just inherited $75,000 and you are considering investing all of the money in the construction of a multifamily property in: Portland, Ore. near 15800 NW West Union

You plan to build a duplex. Each unit will have 2 beds and 2 baths

Market Competition ----

Determine the size in square feet and the rental prices for the nearest 5 competing rental properties with 2 bedroom / 2 bathroom units (include houses and apartments)

Average rent $______

Average size _______sf.

Average rental rates per sf. _______

Construction Costs: –

The building will be 2 stories with // vinyl siding // no basement and // standard quality

Contractor-25%, Design Fees-7%, Contingency-5%

How many total square feet will you need to build for the two units – based upon the average per unit size of the nearest 5 competing 2 bed/2 bath homes or apartments that are for rent ________

For your area, what is the: Cost per square foot: ______ Total construction cost: ________

How much will it cost to build the units using the www.buildingjournal prices, if the land costs $90,000? $________

Financing

If you used the entire inheritance for a down payment and have closing costs of $2,400, what will be your loan amount? ________

What will be your monthly mortgage payments for a 25 year mortgage @4.8%? ________

Potential Income

How much monthly rent could you charge for each unit to be competitive with the nearest 5 competing properties? ________

What is the maximum total GROSS potential monthly rent for both units? $________per month

With expenses @45% of gross rent // vacancy rate of 5% … what is the NET monthly income? $_______ per month

What is the income per month after the mortgage payments are deducted from the net income? $______per month

Additional notes:

• Market Competition
• If you have trouble finding 5 comparable 2bedroom /2 bathroom on craigslist, you can also use any of the previous web sites we have used to find comparables (Zillow, realtor.com, trulia.com…)
• If you still can’t find 5 then you can use fewer comparables or look at similar, but not exact comparables (2bed/1 ½ bath, 2 bed/1 bath)
• Construction of Duplex
• If you have not yet calculated the construction cost, use the residential estimator. The residential estimator allows for you to plug in building height, type of siding, basement…
• Financing
• When calculating mortgage payment
• Total property cost will be: Land cost + building cost
• Total mortgage amount = Total property cost – inheritance + closing costs

Potential Income

Maximum Total Gross Potential Rent (MTGPR) = 2 units X each unit’s monthly rent

NET monthly income = (all income minus all operating expenses except for loan payment)

All Income = (MTGPR – rent not received because of vacancies + other income)

• All Income = (MTGPR – (MTGPR * vacancy rate) + other income)
• For this assignment other income = 0

Calculate all operating expenses @ 45% of gross rent

• Calculate NET monthly income for this example as pre-tax so tax bracket doesn’t apply
• NET monthly income = (All Income – (MTGPR *.45))

Income per month after the mortgage payment = NET monthly income – mortgage

• Once again this is all pre-tax so tax bracket doesn’t apply

Answer rating: 100% (QA)

SOLUTION To answer your question lets break it down into several steps Market Competition Lets assume the following data for the nearest 5 competing rental properties with 2 bedrooms 2 bathrooms 1 120... View the full answer