1444 Danielle Creek Dr Little Elm TX

1444 Danielle Creek Dr, Little Elm – Property Report

Category: Rental property

Disclaimer

This tool is provided “As Is”. All information is believed to be accurate, but not guaranteed. It is intended for the purpose of illustrative projections. The information provided is not intended to replace or substitute any legal, accounting, investment, real estate, tax or other professional advice, consultation or service. The author of this tool is not responsible nor liable for any damages arising from the use of the tool.

Executive Summary

Property Description

Name 1444 Danielle Creek Dr Little Elm TX
Address 1444 Danielle Creek Dr, Little Elm
Type Singlefamily
Size 2110 SF
Rooms 4 bed. + 2 bath. + 1 kitchens
Purchase Price $ 109,900
Rent $ 1,450/month

Financing Overview

Purchase Price $ 109,900
Down Payment $ 21,980
Mortgage (30yr @ 5.50%) $ 87,920
Loan-to-Value (LTV) 80.00 %
Closing Costs $ 2,000
Total Aquisition Cost $ 113,400

Income, Expenses and Cash Flow (Year 1)

Gross Operating Income (GOI) $ 16,530
Total Expenses $ 5,646
Net Operating Income (NOI) $ 10,884
Annual Debt Service $ 5,990
Rehabilitaion $ 2,000
Cash Flow Before Taxes (CFBT) $ 2,893
Income Tax Liability $ 220
Cash Flow After Taxes (CFAT) $ 2,673

Financial Analysis

Holding period of 15 years and discount rate of 10% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore doesn’t provide such exact information.

Net Present Value (NPV) $ 66,299
Internal Rate of Return (IRR) 18.55 %
Cash on Cash Return 19.20 %
Return on Equity (ROE) 10.49 %
Capitalization Rate 9.90 %
Gross Rent Multiplier (GRM) 6.32
Debt-coverage Ratio (DCR) 2.90
Operating Expense Ratio (OER) 34.16 %

Resale Analysis

Sale Price in year 15 (Appreciation:1%) $ 129,912
Sale Proceeds (Before Tax) $ 59,723
Optimal Holding Period (based on NPV) 30 years

Property Description

Paloma Crk is where you will find this 1 story,2 car front entry garage prop.Selling incentive of $500 if prop is closed & recorded by 7-31.

Price $ 109,900
Address 1444 Danielle Creek Dr, Little Elm, 75068, TX
Country US
Year Built 2006
Type Singlefamily
Size 2110 SF
Number of Bedrooms 4
Number of Bathrooms 2
Number of Kitchens 1

Operation Effectiveness

The Annual Property Operating Data

Incomes % of GOI
Gross Scheduled Rent Income $ 17,400
Total Gross Income $ 17,400
Vacancy loss $ 870
Gross Operating Income $ 16,530 100.00 %
Expenses
Repairs $ 600 3.63 %
Manager $ 1,566 9.47 %
Prop_Taxes $ 2,760 16.70 %
Prop_Insurance $ 720 4.36 %
Total Expenses $ 5,646 34.16 %
Net Operating Income $ 10,884 65.84 %

Cash Flow (1st year)

Net Operating Income $ 10,884 65.84 %
Annual Debt Service $ 5,990 36.24 %
Rehabilitation $ 2,000 12.10 %
Cash Flow Before Taxes (CFBT) $ 2,893 17.50 %
Income Tax Liability $ 220 1.33 %
Cash Flow After Taxes (CFAT) $ 2,673 16.17 %

Gross scheduled income (GSI)

represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents.

Vacancy and Credit Loss

represents the part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants.

Gross Operating Income (GOI)

is the actual income which is expected to be collected in the property.

Operating Expenses

are expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn’t include mortgage payments or depreciation).

Net Operating Income (NOI)

is simply the gross operating income minus operating expenses.

Operating Ratios

Operating Expense Ratio 34.16 %
Break-Even Ratio 64.17 %

Cash Flow

represents all the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.

Operating Expense Ratio

is the ratio of the operating expenses to the gross operating income (GOI).

Break-Even Ratio (BER)

is another benchmark used by mortgage lenders. It estimates how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less.

Financial Effectiveness

Financial Measures

Net Present Value $ 66,299
Internal Rate of Return 18.55 %
Profitability Index 3.60
House P/E Ratio 2.34
Annual Depreciation $ 3,197

Holding period of 15 years and discount rate of 10% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore don’t provide such an exact information.

Net Present Value (NPV)

is probably the best measure of any investment thanks to its complexity. It takes into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. Therefore in contrast from most of the measurements, NPV count fully with the time value of money. More information and example is on the blog.

Internal Rate of Return (IRR)

is a rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero.

Profitability Index

is very similar to NPV. It also calculates with the present values of future cash flows and discount rate, therefore it takes in account the time value of money. Profitability index is a ratio which shows if the present value of the cash flows is worth the initial investment.

House P/E Ratio

is often used when measuring other investment tools, such as stocks. The Real Estate P/E ratio counts with the initial investment and annual net operating income.

Investment Return Ratios

Cash on Cash Return 19.20 %
Return on Investment 23.52 %
Return on Equity 10.49 %
Capitalization Rate 9.90 %
Gross Rental Yield 15.83 %
Gross Rent Multiplier 6.32

Cash on Cash Return

is in fact equity dividend rate. It is a ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It is not an exact measurement of an investment, because it does not take in account the future value of money.

Return on Investment

is very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year.

Return on Equity

is one of the financial measures used as well on other types of investments. In Real Estate the return means cash flow after taxes (CFAT) and equity is the initial investment.

Gross Rental Yield

can be used for a particular property or also as a market indicator when using median values of rent and house prices. It is counted from gross scheduled rent and initial investment.

Capitalization Rate

is calculated as ratio of the net operating income and the value of the property. It is in fact the discount rate, used for discounting the future income to determine its present value.

Gross Rent Multiplier

is counted as a ratio of market value of the property and gross scheduled income.

Financing Overview and Analysis

Acquisition Cost
Purchase Price $ 109,900
Closing Costs $ 2,000
Loan Costs $ 1,500
Total $ 113,400
Financing % of Acq.
Down Payment + Costs $ 21,980 19.38 %
Mortgage $ 87,920 77.53 %
Loan to Value Ratio 80.00 %
Debt Coverage Ratio 2.90
Mortgage
Mortgage Amount $ 87,920
Length 30 years
Interest Rate 5.50 %
Monthly Payment $ 499.20

Long Term Financial Forecast


Full View

Year 0 1 5 10 15
Operational Analysis
Gross Scheduled Income $ 0 $ 17,400 $ 18,107 $ 19,030 $ 20,001
Vacancy Loss $ 0 $ 870 $ 905 $ 952 $ 1,000
Gross Operating Income $ 0 $ 16,530 $ 17,201 $ 18,079 $ 19,001
Expenses $ 0 $ 5,646 $ 5,876 $ 6,175 $ 6,490
Net Operating Income $ 0 $ 10,884 $ 11,326 $ 11,903 $ 12,511
Financing
Mortgage Payment $ 0 $ 5,990 $ 5,990 $ 5,990 $ 5,990
Payment Interest Part $ 0 $ 4,806 $ 4,515 $ 4,050 $ 3,437
Payment Principal Part $ 0 $ 1,184 $ 1,475 $ 1,941 $ 2,553
Cash Flow
Rehabilitation $ 0 $ 2,000 $ 0 $ 0 $ 0
Cash Flow Before Taxes $ -25,480 $ 2,893 $ 5,335 $ 5,913 $ 6,520
Depreciation $ 0 $ 3,197 $ 3,197 $ 3,197 $ 3,197
Taxes $ 0 $ 220 $ 903 $ 1,164 $ 1,469
Cash Flow After Taxes $ -25,480 $ 2,673 $ 4,432 $ 4,749 $ 5,051


 

Resale Analysis

Resale Price Evaluation Methods

 

The property is sold after 15 years.

Appreciation (1.00%) $ 129,912
Cap Rate (9.90%) & NOI $ 126,369
Gross Rent Multiplier $ 126,327

Sale Proceeds

 

In the resale analysis we don’t count with taxes which might occur when selling the property. The tax laws for the resale are rather complex and subjected to frequent changes, and are different in every country.

Projected Selling Price $ 129,912
Costs of Sale (7.00%) $ 9,094
Mortgage Balance Payoff $ 61,095
Early Payoff Penalty (0.00 %) $ 0
Sale Proceeds Before Tax $ 59,723

Net Assets and Yield

Net Assets
Sale Proceeds Before Tax $ 59,723
Down Payment $ 21,980
Net Assets $ 37,743
Yield
Annual Net Assets $ 2,516
Average Cash Flow (After Taxes) $ 4,519
Average Annual Yield $ 7,035
Average Annual Return 6.40 %

Optimal Holding Period based on NPV

Holding Period 30 years
Max NPV $ 153,380

Sensitivity Analysis

Loan to Value ratio

Your current LTV ratio is: 80.00%.

LTV NPV IRR
80.00 % $ 66,299 18.55 %
0% $ -29,351 6.16 %
10% $ -24,057 6.59 %
20% $ -18,762 7.10 %
30% $ -13,468 7.71 %
40% $ -8,173 8.45 %
50% $ -2,879 9.38 %
60% $ 2,416 10.60 %
70% $ 7,711 12.30 %
80% $ 13,005 14.89 %
90% $ 18,300 19.73 %

This sensitivity analysis is using the configured holding period, the length and interest rate of the first mortgage and discount rate of 10%. It counts only with a conventional type of loan.

Mortgage Ammortization (Length)

Your current mortgage ammortization is 30 years.

Years NPV IRR
30 $ 66,299 18.55 %
5 $ -17,825 6.65 %
10 $ -11,786 6.98 %
15 $ -7,000 7.52 %
20 $ 3,368 11.23 %
25 $ 9,290 13.43 %
30 $ 13,005 14.89 %

This sensitivity analysis is using the loan amount and interest rate of the first mortgage and discount rate of 10%. It counts only with a conventional type of loan.

 
 


Leave a Comment