| 1 | Scheduled annual rents | $775 per month |
$9,300 |
|
| 2 | Deduct an allowance for vacancies and uncollected rents | typically 5% to 10%, use 5% |
-420 |
|
| 3 | Net rental income | line 1 minus line 2 |
$8,880 |
|
| 4 | Operating expenses like repairs and maintenance | use 10% of net rents |
-888 |
|
| 5 | Property taxes | 1.5% of purchase price |
-1,335 |
|
| 6 | Insurance |
-400 |
||
| 7 | NOI - Net Operating Income before mortgage expense | line 3 minus lines 4, 5 & 6 |
$6,257 |
|
| 8 | Annual interest on the mortgage amount | 7.5% on $62,300 loan |
-4,550 |
|
| 9 | Cash flow before tax | (line 8 minus line 7) |
$1,707 |
|
| 10 | Depreciation | $89,000 less 10% for value of the land, then divide by 27.5 years |
-$2,913 |
|
| 11 | Taxable profit (loss) | line 9 minus line 10 |
-$1,206 |
|
| 12 | Annual tax savings or (tax due) | line 11 multiplied by 22.5% |
$271 |
|
| 13 | After-tax cash flow | line 9 plus line 12 |
$1,978 |
|
| 14 | Cash-on-cash return | line 13 divided by cash invested $33,900 |
5.8% |
|
| 15 | Projected one-year gain in value or sales price | For initial year: price plus1/2 improvements = $92,000 times 0.043 |
$3,956 |
|
| 16 | Projected total after-tax return for the first year | Line 13 plus line 15 |
$5,934 |
|
| 17 | Total after-tax overall rate of return for first year | line 16 divided by cash invested $33,900 |
17.5% |