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You are looking at the following projects and need to decide how best to deploy
You are looking at the following projects and need to decide how best to deploy an inheritance you received of $150,000. Using the information below, determine the following ratios. You may use an excel spreadsheet to complete a comprehensive review of each of the properties below. Once you have completed the ratios, you are to determine which property would be the best option. Support your answer in a report using appropriate ratios and any other relevant factors you deem necessary.
• Gross Income Multiplier
• Net Income Multiplier
• Operating Ratio
• Break Even
• Debt Coverage Ratio
• Overall Cap Rate
• Equity Dividend Rate
• Cash on Cash Return
• Present Value of Cash Flows
• Net Present Value
• Profitability Index
• Investment Value
• Internal Rate of Return
Which option would you select given the following factors:
Annual Growth Rate: 4%
Required Rate of Return: 8%
Tax Rate: 15%
Equity Available: $150,000
Loan Rate: 4%
Holding Period: 12 Years
Annual Price Appreciation: 3.5% per year
*For this example, we will not consider the vacancy rate for now.
Units Sales Price Avg Revenue Per Unit/Month Annual Operating Expenses (Interest not included)
Duplex 2 $ 125,000.00 $ 615.00 $ 6,642.00
Duplex #2 2 $ 105,000.00 $ 575.00 $ 6,210.00
Fourplex 4 $ 245,000.00 $ 850.00 $ 22,160.00
Apartment Building #1 16 $ 600,000.00 $ 600.00 $ 69,840.00
Apartment Building #2 32 $ 1,200,000.00 $ 695.00 $ 162,096.00
Single Family Home #1 1 $ 189,000.00 $ 1,750.00 $ 11,010.00
Single Family Home #2 1 $ 215,000.00 $ 2,000.00 $ 13,400.00
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