Gilbert

Exercise 1: The Gilbert Building

1. Setup Based on 50% Occupancy:

Gross Scheduled Income $1,000,000

(Vacancy) (500,000)

Effective Gross Income 500,000

(Operating Expenses) (275,000)

(Property Taxes) (190,000)

(Structural Reserve) (10,000)

Net Operating Income 25,000

(Debt Service) (308,184)

Cash Flow Before Taxes (283,184)

2. Setup Based on 95% Occupancy:

Gross Scheduled Income $1,000,000

(Vacancy) (50,000)

Effective Gross Income 950,000

(Operating Expenses) (275,000)

(Property Taxes) (190,000)

(Structural Reserve) (10,000)

Net Operating Income $475,000

(Debt Service) (308,184)

Cash Flow Before Taxes $166,816

Exercise 2: The Gilbert Building Solution

1. Debt Constant = = = 8.81%

2. Free and Clear Return = = = 0.5%

3. Cash-on Cash Return = = = (18.88%)

4. Free and Clear Return = = = 9.5%

5. Cash-on-Cash Return = = = 11.12%

Exercise 3: The Gilbert Building Solution

1. Loan to Value = = 3,500,000 = 63.6%

5,500,000

2. Loan to Cost = Loan = = 70%

Cost

3. Debt Coverage Ratio = = = 1.54

4. Break Even Point = =

Exercise 4: The Gilbert Building Solution

Setup Based on 95% Occupancy (at $20 per square foot):

Gross Scheduled Income $1,000,000

(Vacancy) (50,000)

Effective Gross Income 950,000

(Operating Expenses) (275,000)

(Property Taxes) (190,000)

(Structural Reserve) (10,000)

Net Operating Income $475,000

Value at a 10% Cap Rate: $475,000/ 10% = $4,750,000 or $4.75 Million.

Value at an 8.5% Cap Rate: $475,000/ 8.5% = $5,588,235.

Setup Based on 95% Occupancy (at $22 per square foot):

Gross Scheduled Income $1,100,000

(Vacancy) (55,000)

Effective Gross Income 1,045,000

(Operating Expenses) (275,000)

(Property Taxes) (190,000)...