$450,000 $63,425 $39, % PURCHASE PRICE NET OPERATING INCOME ANNUAL CASH FLOW CAP RATE

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1 Executive Summary Key Property Metrics $450,000 $63,425 $39, % PURCHASE PRICE NET OPERATING INCOME ANNUAL CASH FLOW CAP RATE $70,000 $60,000 $50,000 $40,000 $30,000 Annual Cash Flow Repairs, 8% Maintenance, 11% OPEX Property Taxes, 9% Insurance, 7% Utilities, 9% $20,000 $10,000 Advertising, 17% $0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Property Management, 39% Key Assumptions Cash Flow Summary Amortization Term 30 Years Total Rental Income $85,500 Mortgage Interest Rate 6.0% Operating Expenses ($22,075) Monthly Rent Revenue $7,500 Debt Service ($24,282) Vacancy Rate 5.0% Cash Flow to Investor $39,143 Equity Required to Buy $145,000 Cash on Cash Return 27.0% Page 1 of 8

2 Assumption Dashboard Property Information Executive Summary Property Address Annual Cash on Cash ROI (YR1) 27.0% Property Square Feet 3,000 Annual Cash Flow (YR1) $39,143 Units 2 Total Cash Flow (10 YR Hold) $483,333 Bedrooms 5 Property Cap Rate (YR1) 14.1% Rent Revenue Assumptions Property Acquisition Monthly Rent Revenue $7,500 Purchase Price $450,000 Other Monthly Income $0 Estimated Value $450,000 Vacancy Rate 5.0% Closing Costs Rate 5.0% Rent Inflation (annual) 3.0% Deferred Maintenance Costs $10,000 Financing Strategy Operating Expense Assumptions Downpayment % 25.0% Property Taxes (per/yr) $2,000 Interest Rate (annual) 6.000% Insurance (per/yr) $1,500 Amortization Term (years) 30 Utilities (per/yr) $2,000 Implied Loan to Value (LTV) 75.0% Advertising (per/yr) $3,750 Monthly Debt Service Payment $2,023 Property Management Rate 10% Repair Rate 2% Investment Capital Maintenance 3% Total Purchase Cost $482,500 Inflation (annual) 2.5% Mortgage Amount $337,500 Capital Required to Purchase $145,000 Page 2 of 8

3 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Property Income Annual Rent Revenue $90,000 $92,700 $95,481 $98,345 $101,296 $104,335 $107,465 $110,689 $114,009 $117,430 Vacancy (4,500) (4,635) (4,774) (4,917) (5,065) (5,217) (5,373) (5,534) (5,700) (5,871) Other Income Effective Gross Income (EGI) 85,500 88,065 90,707 93,428 96,231 99, , , , ,558 Operating Expenses Property Taxes $2,000 $2,050 $2,101 $2,154 $2,208 $2,263 $2,319 $2,377 $2,437 $2,498 Insurance 1,500 1,538 1,576 1,615 1,656 1,697 1,740 1,783 1,828 1,873 Utilities 2,000 2,050 2,101 2,154 2,208 2,263 2,319 2,377 2,437 2,498 Advertising 3,750 3,844 3,940 4,038 4,139 4,243 4,349 4,458 4,569 4,683 Property Management 8,550 9,027 9,297 9,576 9,864 10,160 10,464 10,778 11,102 11,435 Repairs 1,710 1,805 1,859 1,915 1,973 2,032 2,093 2,156 2,220 2,287 Maintenance 2,565 2,708 2,789 2,873 2,959 3,048 3,139 3,233 3,330 3,430 Total Operating Expenses (Opex) 22,075 23,021 23,664 24,326 25,006 25,705 26,424 27,163 27,923 28,704 Net Operating Income (NOI) $63,425 $65,044 $67,042 $69,102 $71,225 $73,413 $75,668 $77,991 $80,386 $82,854 Debt Service: Principal 4,145 4,400 4,672 4,960 5,266 5,590 5,935 6,301 6,690 7,102 Interest 20,137 19,882 19,610 19,322 19,016 18,691 18,347 17,981 17,592 17,179 Total Debt Service 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 Net Cash Flow after Debt Service $39,143 $40,762 $42,761 $44,821 $46,943 $49,131 $51,386 $53,710 $56,104 $58,572 Cumulative Cash Flow 39,143 79, , , , , , , , ,333 Net Exit Proceeds Purchase Capital (145,000) Property Exit Proceeds 952,822 Mortgage Balance Payoff (282,439) Cash Flow to Investor ($105,857) $40,762 $42,761 $44,821 $46,943 $49,131 $51,386 $53,710 $56,104 $728,955 Page 3 of 8

4 Ratio Analysis Cash Flow Metrics (Year 1) $85,500 $63,425 $39,143 GROSS INCOME NET OPERATING INCOME CASH FLOW Operational & Financial Metrics (Year 1) 27.0% 14.1% 45.8% CASH ON CASH ROI CAP RATE CASH FLOW MARGIN 25.8% 54.2% 18.8% OPERATING EXPENSE BREAK EVEN INTEREST CARRY 49.3% IRR DEBT SERVICE COVERAGE GROSS RENT MULTIPLIER Page 4 of 8

5 Loan Amortization Schedule Financing Required Purchase Price $450,000 Down Payment $112,500 Mortgage Required $337,500 Interest Rate (annual) 6.000% Amortization Term (years) 30 Monthly Debt Service Payment $2,023 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Loan Amortization Schedule Beginning Balance $337,500 $333,355 $328,955 $324,284 $319,324 $314,058 $308,468 $302,533 $296,232 $289,542 Principal 4,145 4,400 4,672 4,960 5,266 5,590 5,935 6,301 6,690 7,102 Interest 20,137 19,882 19,610 19,322 19,016 18,691 18,347 17,981 17,592 17,179 Total Payment 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 24,282 Ending Balance 333, , , , , , , , , ,439 Page 5 of 8

6 Exit Strategy Property Sale Price Forecast & Valuation Net Operating Income Method Year 10 NOI $82,854 Target Exit Cap Rate 8.0% Year 10 Property Value $1,035,676 Exit Closing Costs Rate 8.0% Exit Closing Costs ($82,854) Year 10 Exit Proceeds $952,822 Financial Valuation Discount Rate 10.0% IRR 49.3% NPV $454,671 Page 6 of 8

7 Definitions Term: Definition: Source: Effective Gross Income (EGI) The amount of income produced by a piece of property, plus miscellaneous income, less vacancy costs and collection losses. Effective gross income is a metric commonly used to evaluate the value of a piece of investment property. Operating Expense (Opex) Costs associated with the operation and maintenance of an income-producing property, such as property taxes, utilities, insurance, maintenance, property management. Excludes debt service and depreciation. Net Operating Income (NOI) A company's operating income after operating expenses are deducted, but before income taxes and interest are deducted. Formula = Effective Gross Income - Operating Expense Capitalization Rate (Cap Rate) Ratio used to estimate the value of income producing properties. Put simply, the cap rate is the net operating income divided by the sales price or value of a property expressed as a percentage. Formula = Net Operating Income / Purchase Price Operating Expense Ratio A measure of what it costs to operate a piece of property compared to the income that the property brings in. The operating expense ratio is calculated by dividing a property's operating expense by its gross operating income. Formula = Operating Expense / Gross Income Break Even Ratio The break-even ratio of a real estate investment is the total of the debt service and operating expenses divided by the gross operating income Formula = (Debt Service + Operating Expenses) / Gross Income Interest Carry Ratio This ratio gives investors an idea of the maximum interest rate that a loan's cash flow could carry. Formula = Net Operating Income / Loan Amount Debt Service Coverage Ratio (DSCR) Ratio between a property's Net Operating Income and annual debt service. This is a metric commonly used by lenders to measure whether the property will generate sufficient cash flow to cover it's mortgage payments. Formula = Net Operating Income / Annual Debt Service Page 7 of 8

8 Limit of Liability Disclaimer The information contained in this product is for informational purposes only. The owners, publishers, and contributors shall not be liable for any direct or consequential loss or any other damages resulting from the use of this product. The owners, publishers, and contributors provide no warranty about the content or accuracy of content enclosed. The financial examples in this guide are just that, examples. They are not intended to represent or guarentee that you will achieve similar results. Recognize that any business endeavor and investment has risk for loss of capital involved. Copyright 2012 All Rights Reserved Page 8 of 8

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