You work in a property management company. You are assigned to develop financial reports for a rental property, Spring Heights, which is a 50-unit apartment building in the city of Melbourne. The building has 50 three-bedroom apartment units with current monthly rent of $2,500. Leases with tenants are made for 12-month periods.
The following table shows the lease structure and status of all the units as of 30 June 2021.
|
Type |
Status |
# of Units |
Lease Start Date |
Lease Expiry Date |
Monthly Rent |
|
Type I Units |
Occupied |
45 |
1 July 21 |
30 June 22 |
$2,500 |
|
Type II Units |
Vacant |
5 |
— |
— |
— |
When these leases (Type I) rollover near end of June 2022, a certain percentage are expected to be renewed at market rents for an additional 12 months. The rest would remain vacant for a month on average. On the other hand, vacant units (Type II) will be leased out at the market rent throughout the year. Some units are vacated due to non-payment of rent, early termination, etc. In terms of additional income, Spring Lake expects to earn a total of $40,000 from laundry facilities, renting of tennis courts, parking, and others in a year.
You find that operating expense per unit is approximately $300 per month in the first 6 months in 2021, including utilities, real estate taxes, security, landscaping, insurance, and repairs. Your company is paid $20,000 annually for managing this property. The recurring expense, primarily make-ready expense (carpet, paint, drywall repairs, …), is currently $50,000 per annum. The property has no mortgage. The owner has an income tax bracket of 25%. The property is subject to an annual depreciation allowance of 2.5%. The purchase price (in 2010) of this property was $15 million. Its building component was recorded as $8 million.
The owner feels that the rental apartment sector may not recover soon. She is considering selling the property at the end of 2021 because she has several other investment opportunities. She could also hold it for another two years and wait for the market to rebound. Additionally, she wonders if she should invest in remodeling of the kitchens and bathrooms and make other investments to increase the selling price if she must sell it in two years.
Question 4. [20 marks, Suggested Word Count 500
1) Calculate Net Operating Income (NOI), Before-Tax Cash Flow (BTCF), and After-Tax Cash Flow (ATCF). Create an itemized annual budget in a spreadsheet and copy the table here. Below is a template for you to start with. You may want to add more items if necessary. Ensure that the table includes NOI, BTCF, and ATCF. Explain the process of your calculation briefly. Write down the formulas if necessary.
[10 marks]
Template for your worksheet.
|
Operating Income |
|
|
Gross Scheduled Rent |
|
|
Less Loss to Collection and Vacancy |
|
|
|
|
|
Gross Collectible Income |
|
|
Other Income |
|
|
Total Anticipated Income |
|
|
Operating Expense |
|
|
Less Operating Expense |
|
|
Less Management Fee |
|
|
Net Operating Income |
|
|
Net Operating Income |
|
|
Recurring Expenses |
|
|
Less Recurring Capital Expense |
|
|
Less Debt Service |
|
|
Before-Tax Cash Flow |
|
|
Taxable Income and Tax Payment |
|
|
Less Recurring Capital Expense |
|
|
Less Loan Interest Payment |
|
|
Less Depreciation |
|
|
Taxable Income |
|
|
Income Tax Payment |
|
|
After-Tax Cash Flow |
|
|
After-Tax Cash Flow |
|
[Write your answers below ↓. Add additional pages if necessary.]
[End of Question 4.]
Question 5. [20 marks, Suggested Word Count 800]
Given the information provided, you are asked to make recommendations on: (1) whether the owner should sell this property now or wait for two years; (2) whether she need to renovate the building to get a better price in two years. In completing this task, you SHOULD make your own assumptions if the information given above is insufficient.
(1) Create a table in a spreadsheet and copy the table here. Build on the table you created in Question 4. Prepare a 2-year forecast of income and expenses for Spring Heights Apartments (from 01/01/2022 to 31/12/2023). Ensure that the table includes estimates of NOI, BTCF, and ATCF. Explain the process of your calculation briefly. Write down the formulas if necessary. (Suggested word count: 200)
[6 marks]
(2) Without calculation or creating a spreadsheet model, explain the steps in making a recommendation to the owner on whether she should dispose the property now or wait for another two years. If you strongly prefer, you could use a spreadsheet table to demonstrate it. But it is not requested. Some information to answer this question is not given. You must fill in the gaps yourself and indicate the information you need to collect. (Suggested word count: 300)
[8 marks]
[6 marks]
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
Ace Writing Center has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.
Essays
At Ace Writing Center, Nowadays, students normally have extremely busy schedules. You will note that some of them have to take on some evening or weekend jobs in order to get some income that can help them to sustain in college or in the university. This can deny them a chance to write all the essays given. Others usually get bombarded with a lot of work by their lecturers. This can still delay such students from working on all their essays. However, some of them usually try to work on all these essays but end up delivering their work late. This can prevent them from graduating since most lecturers are strict on deadlines. If you want to write a business essay, the wise way is to hire an outstanding essay writing service like us, so that you can get the best results. If you are keen, you will note that many companies usually overcharge their customers. Some of them are there only to make money. And in reality, they really don’t care to build a long term commitment with students. You should not choose such companies. You should take your time and choose a reliable company to work with. Ace Writing Center is the ultimate solution for you. We have been offering our writing service for more than 7 years. This is a clear indication that you will get quality essay writing service. We have a wide range of writers who can work on any business essay that you might have. We believe in doing extensive research so that we can provide quality work to all our clients. .
Admissions
Admission and Business Papers
Have you ever had to write an admission essay for college? The majority of students face the same issues when applying to a university or college and many in such situations decide they need professional help to cope with this matter. They get in a situation when the deadline keeps coming closer but lack motivation to start because they are just not sure if their writing skills are strong enough. We have a solution for you! Ace Writing Center is the best admission essay writing service with a large professional team and years of experience in providing high-quality papers to students of all levels and faculties. The mission of our team is to help students make their dreams of entering a good college come true and that’s what we offer!.
Editing
Editing and Proofreading
Sometimes all the words for your paper just flow out of your mind and into your fingers. You type quickly at your keyboard and there they are, your beautiful words right there on the screen. But you have no idea how to polish it up. You may be wishing there was a paper writing service that offered this type of writing service. Look no more! Here at Ace Writing Center, we offer you an editing and proofreading option that you can't find anywhere else..
Coursework
College Essay Writing
In case you are familiar Ace Writing Center, you know the way to distinguish a better company from a cheap one exactly. First of all, poor service website does not have a sufficient support. We think support team is an essential part of success; it has to answer all clients’ questions and be a connecting link between clients and their writers. On our web-service you will get answers about anything you need and your writer will receive all your instructions, assignments and requirements exactly and swiftly. A writing service that we run has got a flexible pricing system that will save you from senseless wastes and many bonus systems that let you sparing money for something important for you.
