2. Determine the annual Net Operating Income (NOI) and the cash flow before taxe

Question

2. Determine the annual Net Operating Income (NOI) and the cash flow before taxes using the assumptions and facts for the following real estate investment:

a) 40 Units

b) Rent per unit is $1,500 per month

c) Vacancy and debt losses are 5% of gross potential income

d) Operating Expenses are $426,000 per year

e) Debt service is 106,000, which includes $90,000 in interest

f) Depreciation expense is $46,000 per annum.

3. Using the information from question #2, determine the Taxable Income or Loss.

4. Using the information from questions 2 & 3, determine the after-tax cash flow, assuming a tax rate of 42%.

Explanation / Answer

Total rent for 40 units @ $1500 per unit       720,000 Operating expenses       426,000 debt service       106,000 Depreciation          46,000 Gross income       142,000 5% debt and vacany losses            7,100 Taxable income       134,900 Tax @ 42%          56,658 Income after tax          78,242

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