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Learn how to design investment analysis presentations that are easy to understand and will motivate clients to make investment decisions. Participate in hands-on demonstrations of how to use CCIM technology tools for different investment analysis output levels.
Citation preview
Investment Analysis Toolsto Guide Investment Decisions
Steven R. Price, CCIM Price Properties, Inc. Colorado
Springs, Colorado
10:30 – 11:45
Disclaimer
• The screenshots contained herein include– CCIM Excel® templates
• 5-Year Analysis Workbook• DCF Analysis Workbook v9.5• Lease vs. Purchase Workbook
– STDB hosted software available to CCIM members– Commercially available packaged software
Neither the CCIM Institute or the Presenter are selling or endorsing the commercially available software shown. It is being presented solely for illustration purposes to
reflect differences between CCIM-owned and CCIM-endorsed products.
Objectives
• Evaluate various investment analysis tools• Use digital tools to enhance your presentation,
not dominate it• Blend all skills and tools to:
– Improve Listing Decisions– Improve Investment Decisions– Improve Presentations– Close more transactions
What’s in your tool belt?
Forecasting
IRR
NPVCapital
Accumulation
NegotiatingPresenting
Calculator
Computer SoftwareSite Analysis
Supply & Demand
Tablet
Financial Analysis
Taxation
User Decisions
Investor Decisions
Investor Benchmarks
GIS
Financing
Partnerships
Cash-on-Cash
GRM
GRM
Computer don’t sell real estate.People do.
People don’t trust computers.Trust is the key to selling anything.
Steve’s 1st Rule
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
Needs ________________________
Urgency ________________________
Motivation ________________________
Expectations ________________________
Resources ________________________
Authority ________________________
Loyalty ________________________
Qualifying
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
If you don’t give trust to others, it’s because they
haven’t earned it. If you don’t get trust from others, it’s because YOU
haven’t earned it.Gitomer
Little Teal Book of Trust, Jeffrey Gitomer
All things being equal, people want to do business
with their friends. All things being not quite so equal, people still want to
do business with their friends.
Gitomer
Little Teal Book of Trust, Jeffrey Gitomer
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
Center for Creative Learning
SAVI Learning Styles
• Somatic Learning by Doing• Auditory Learning by Listening• Visual Learning by
Observing• Intellectual Learning by
Analyzing
The Accelerated Learning Handbook, Dave Meier
Steve’s SAVI Scores
• Meier conducted an 80 question survey where attendees answered questions about how they perceive they learn best, what captures the interest and attention, etc.
S A V I
24 18 13 25
The Accelerated Learning Handbook, Dave Meier-
Somatic
(Doing)
Visual
(Observing)
Auditory/Affective
(Feeling)
Intellectual
(Analyzing)
37% 16%
24% 23%
Steve’s SAVI Scale
The Accelerated Learning Handbook, Dave Meier
Type 1Type 4
Type 2Type 3
4 8 12 16 20 24 28 3232 28 24 20 16 12 8 4
4
8
12
1
6
20
24
2
8
32
32
28
24
20
16
12
8
4
SOMATIC VISUAL
AUDITORY
INTELLECTUAL
Use Visual Aids
There are twenty-two times the number of nerves from the eye to the brain as from the ear to the brain.
The Psychology of Selling, Brian Tracy
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
LIMBIC SYSTEM
REPTILIAN BRAIN
MOTOR & SENSORY CORTEX
NEOCORTEX
•Survival
•Balance
•Autonomic Systems
•Think
•Reason
•Plan
•Solve
•Learn
•Create
•Verbal•Excitement
•Emotion
•Long Term Memory
•Instincts
• Feeding
• Fighting
• Fleeing
•Body Movement
•Talking
TRIUNE BRAIN
Buyer Types
1. Apathetic Buyer (about 5%)
– Will never buy anything, no matter how good
2. Self-Actualizing Buyer (about 5%)
– Knows exactly what s/he wants and $$$
3. Analytical Buyer (about25%)
– Self-contained and task oriented; slow and specific
4. Relationship Buyer (about25%)
– Concerned about people and their opinions
5. Driver Buyer (about 25% depending on what you sell)
– Direct, impatient, straight to the point; deal maker
6. Socializer Buyer (about25%)
– Outgoing, extroverted, achievement & results oriented
The Psychology of Selling, Brian Tracy
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
Time Management
The average attention span of an adult is about three sentences.
The Psychology of Selling, Brian Tracy
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
CI-104 Case Study
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Potential Rental Income $1,345,000 $1,345,000 $1,345,000 $1,345,000 $1,345,000 $1,345,000+ Potential Pass-thrus $553,000 $566,825 $581,009 $595,563 $610,496 $625,818= Total Potential Income $1,898,000 $1,911,825 $1,926,009 $1,940,563 $1,955,496 $1,970,818- Vacancy & Credit Losses @0% $0 $0 $0 $0 $0 $0= Gross Operating Income $1,898,000 $1,911,825 $1,926,009 $1,940,563 $1,955,496 $1,970,818- Taxes $158,000 $161,160 $164,383 $167,671 $171,024 $174,445- Insurance $118,500 $120,870 $123,287 $125,753 $128,268 $130,834- CAM $276,500 $284,795 $293,339 $302,139 $311,203 $320,539= Net Operating Income $1,345,000 $1,345,000 $1,345,000 $1,345,000 $1,345,000 $1,345,000
Potential Rental Income $372,000 $384,360 $397,139 $410,351 $424,011 $438,135+ Potential Pass-thrus $168,000 $172,200 $176,509 $180,931 $185,467 $190,122= Total Potential Income $540,000 $556,560 $573,648 $591,281 $609,478 $628,257- Vacancy & Credit Losses @7% $37,800 $38,959 $40,155 $41,390 $42,663 $43,978= Gross Operating Income $502,200 $517,601 $533,493 $549,892 $566,815 $584,279- Taxes $48,000 $48,960 $49,939 $50,938 $51,957 $52,996- Insurance $36,000 $36,720 $37,454 $38,203 $38,968 $39,747- CAM $84,000 $86,520 $89,116 $91,789 $94,543 $97,379= Net Operating Income $334,200 $345,401 $356,983 $368,961 $381,348 $394,157
$1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157TOTAL NET OPERATING INCOME
NATIONAL CREDIT TENANTS
LOCAL CREDIT TENANTS
Hidden Lakes Retail
Property Name Annual Property Operating DataLocation
Type of Property
Size of Property
Purpose of analysis
Assessed/Appraised Values
Land 20 20%Improvements 80 80% Amort LoanPersonal Property 0 0% Balance Periodic Pmt Pmts/Yr Interest Period TermTotal 100 100% 1st $13,300,000 ####### 12 7.5% 20 10
2nd 12Adjusted Basis as of: 23-Oct-13
$/SQ FT %
ALL FIGURES ARE ANNUAL or $/Unit of GOI COMMENTS/FOOTNOTES1 POTENTIAL RENTAL INCOME 1,679,2002 Less: Vacancy & Cr. Losses of PRI )3 EFFECTIVE RENTAL INCOME 1,679,2004 Plus: Other Income (collectable)
5 GROSS OPERATING INCOME 1,679,200 OPERATING EXPENSES:
789
1011121314
15161718192021222324252627282930 1,679,20031 1,285,72732333435 $393,473
HIDDEN LAKES RETAIL
COMMERCIAL103,000 (Sq. Ft./Units)
FROM CASH FLOW FORECAST
Real Estate Taxes
Personal Property Taxes
Property Insurance
Licenses/Permits
Accounting and Legal
Off Site Management
Payroll
Expenses/Benefits
CI-104, CASE 3
Taxes/Worker's Compensation
Repairs and Maintenance
Utilities:
Less: Funded Reserves
CASH FLOW BEFORE TAXES
NET OPERATING INCOME
266,000
19,000,000200,000
13,300,0006,166,000
$19,200,000
Less: Annual Debt Service
Advertising Supplies
Miscellaneous Contract Services:
Less: Leasing Commissions
Less: Participation Payments
TOTAL OPERATING EXPENSES
Purchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial Investment
Gross Rent Multiplier
Capitalization Rate
Cash on Cash
Cash Flow Analysis Worksheet
Property NamePrepared ForPrepared By
Date Prepared
Mortgage Data Cost Recovery Data1st Mortgage 2nd Mortgage Improvements Personal Property
Amount 13,300,000 Value 15,360,000Interest Rate 7.50% C. R. Method SLAmortization Period 20. Years Useful Life 39Loan Term 10. Years In Service Date 1-Jan-02Payments/Year 12 12 Date of Sale December-06Periodic Payment 107,143.89 - Recapture
Annual Debt Service 1,285,726.74 - Investment Tax Loan Fees/Costs 266,000 Credit ($$ or %)
Taxable IncomeEnd of Year : 1 2 3 4 5
1 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3482
3 =Effective Rental Income 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3484
5 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3486
7 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3488 987,383 964,222 939,262 912,365 883,3809
10
11 377,395 393,830 393,830 393,830 377,39512
13 26,600 26,600 26,600 26,600 26,60014
15 287,822 305,749 342,291 381,166 438,97316 100,738 107,012 119,802 133,408 153,640
Cash Flow17 1,679,200 1,690,401 1,701,983 1,713,961 1,726,34818 1,285,727 1,285,727 1,285,727 1,285,727 1,285,72719
20
21
22 393,473 404,674 416,256 428,234 440,62123 100,738 107,012 119,802 133,408 153,64024 $292,736 $297,662 $296,455 $294,826 $286,981
=NET OPERATING INCOME
19,000,000200,000266,000
13,300,0006,166,000
-Participation Payments
-Amortization of Loan Fees/Costs
-Leasing Commissions
=Real Estate Taxable Income
Tax Liability (Savings) at 35.0%
Potential Rental Income
-Vacancy & Credit Losses
+Other Income (collectable)
=Gross Operating Income
-Operating Expenses
-Participatipation Payments
-Leasing Commissions
=CASH FLOW BEFORE TAXES
-Tax Liability (Savings) (Line 16)
=CASH FLOW AFTER TAXES
-Funded Reserves
23-Oct-13
HIDDEN LAKES RETAILCI-104, CASE 3
NET OPERATING INCOME (Line 7)
-Annual Debt Service
-Interest - 1st Mortgage
-Interest - 2nd Mortgage
-Cost Recovery - Improvements-Cost Recovery - Personal Property
Purchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial Investment
Debt Service Coverage
Ratio
Mid-Month Convention
Cost Recovery
Alternative Cash Sales Worksheet
Mortgage BalancesEnd of Year: 1 2 3 4 5
Principal Balance - 1st Mortgage 13,001,656 12,680,151 12,333,687 11,960,325 11,557,979Principal Balance - 2nd Mortgage
TOTAL UNPAID BALANCE $13,001,656 $12,680,151 $12,333,687 $11,960,325 $11,557,979
Calculation of Sale Proceeds
PROJECTED SALES PRICE $19,324,000 $19,324,000 $19,324,000
(At 9.% cap) (At 9.% cap) (At 9.% cap)
CALCULATION OF ADJUSTED BASIS:
1 Basis at Acquisition $19,200,000 $19,200,000 $19,200,0002 +Capital Additions Toggle the explanatory highlights and
3 -Cost Recovery (Depreciation) Taken 1,936,280 1,936,280 1,936,2804 -Basis in Partial Sales (Suggest turn off before printing)
5 =Adjusted Basis at Sale 17,263,720 17,263,720 17,263,720
CALCULATION OF CAPITAL GAIN ON SALE:
6 Sale Price 19,324,000 19,324,000 19,324,0007 -Costs of Sale 386,480 386,480 386,4808 -Adjusted Basis at Sale (Line 5) 17,263,720 17,263,720 17,263,7209 -Participation Payment on Sale
10 =Gain or (Loss) 1,673,800 1,673,800 1,673,80011 -Straight Line Cost Recovery (limited to gain) 1,673,800 1,673,800 1,673,80012 -Suspended Losses
13 =Capital Gain from Appreciation
ITEMS TAXED AS ORDINARY INCOME:
14 Unamortized Loan Fees/Costs (negative) (133,000) (133,000) (133,000)15 +
16 =Ordinary Taxable Income (133,000) (133,000) (133,000)
CALCULATION OF SALES PROCEEDS AFTER TAX:
17 Sale Price 19,324,000 19,324,000 19,324,00018 -Cost of Sale 386,480 386,480 386,48019 +Balance of Funded Reserves
20 -Mortgage Balance(s) 11,557,979 11,557,979 11,557,97921 -Participation Payments on Sale
22 =Sale Proceeds Before Tax 7,379,541 7,379,541 7,379,54123 -Tax (Savings): Ordinary Income at 35% of line 16 (46,550) (46,550) (46,550)24 -Tax: Straight Line Recapture at 25% of line 11 418,450 418,450 418,45025 -Tax on Capital Gains at 15% of line 13
26 =SALE PROCEEDS AFTER TAX $7,007,641 $7,007,641 $7,007,641
Adjusted Basis
Unamortized Loan Fees
Tax on Straight Line
Recapture
Cash Flow Analysis Worksheet
Property NamePrepared ForPrepared By
Date Prepared
Mortgage Data Cost Recovery Data1st Mortgage 2nd Mortgage Improvements Personal Property
Amount 13,300,000 Value 15,360,000Interest Rate 7.50% C. R. Method SLAmortization Period 20. Years Useful Life 39Loan Term 10. Years In Service Date 1-Jan-02Payments/Year 12 12 Date of Sale December-06Periodic Payment 107,143.89 - Recapture
Annual Debt Service 1,285,726.74 - Investment Tax Loan Fees/Costs 266,000 Credit ($$ or %)
Taxable IncomeEnd of Year : 1 2 3 4 5
1 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3482
3 =Effective Rental Income 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3484
5 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3486
7 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348=NET OPERATING INCOME
19,000,000200,000266,000
13,300,0006,166,000
Potential Rental Income
-Vacancy & Credit Losses
+Other Income (collectable)
=Gross Operating Income
-Operating Expenses
23-Oct-13
HIDDEN LAKES RETAILCI-104, CASE 3
Purchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial Investment
Taxable IncomeEnd of Year : 1 2 3 4 5
1 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3482
3 =Effective Rental Income 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3484
5 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3486
7 1,679,200 1,690,401 1,701,983 1,713,961 1,726,3488 987,383 964,222 939,262 912,365 883,3809
10
11 377,395 393,830 393,830 393,830 377,39512
13 26,600 26,600 26,600 26,600 26,60014
15 287,822 305,749 342,291 381,166 438,97316 100,738 107,012 119,802 133,408 153,640
Cash Flow17 1,679,200 1,690,401 1,701,983 1,713,961 1,726,34818 1,285,727 1,285,727 1,285,727 1,285,727 1,285,72719
20
21
22 393,473 404,674 416,256 428,234 440,62123 100,738 107,012 119,802 133,408 153,64024 $292,736 $297,662 $296,455 $294,826 $286,981
=NET OPERATING INCOME
-Participation Payments
-Amortization of Loan Fees/Costs
-Leasing Commissions
=Real Estate Taxable Income
Tax Liability (Savings) at 35.0%
Potential Rental Income
-Vacancy & Credit Losses
+Other Income (collectable)
=Gross Operating Income
-Operating Expenses
-Participatipation Payments
-Leasing Commissions
=CASH FLOW BEFORE TAXES
-Tax Liability (Savings) (Line 16)
=CASH FLOW AFTER TAXES
-Funded Reserves
NET OPERATING INCOME (Line 7)
-Annual Debt Service
-Interest - 1st Mortgage
-Interest - 2nd Mortgage
-Cost Recovery - Improvements-Cost Recovery - Personal Property
Alternative Cash Sales Worksheet
Mortgage BalancesEnd of Year: 1 2 3 4 5
Principal Balance - 1st Mortgage 13,001,656 12,680,151 12,333,687 11,960,325 11,557,979Principal Balance - 2nd Mortgage
TOTAL UNPAID BALANCE $13,001,656 $12,680,151 $12,333,687 $11,960,325 $11,557,979
Calculation of Sale Proceeds
PROJECTED SALES PRICE $19,324,000 $19,324,000 $19,324,000
(At 9.% cap) (At 9.% cap) (At 9.% cap)
CALCULATION OF ADJUSTED BASIS:
1 Basis at Acquisition $19,200,000 $19,200,000 $19,200,0002 +Capital Additions Toggle the explanatory highlights and
3 -Cost Recovery (Depreciation) Taken 1,936,280 1,936,280 1,936,2804 -Basis in Partial Sales (Suggest turn off before printing)
5 =Adjusted Basis at Sale 17,263,720 17,263,720 17,263,720
CALCULATION OF CAPITAL GAIN ON SALE:
6 Sale Price 19,324,000 19,324,000 19,324,0007 -Costs of Sale 386,480 386,480 386,4808 -Adjusted Basis at Sale (Line 5) 17,263,720 17,263,720 17,263,7209 -Participation Payment on Sale
10 =Gain or (Loss) 1,673,800 1,673,800 1,673,80011 -Straight Line Cost Recovery (limited to gain) 1,673,800 1,673,800 1,673,80012 -Suspended Losses
13 =Capital Gain from Appreciation
CALCULATION OF ADJUSTED BASIS:
1 Basis at Acquisition $19,200,000 $19,200,000 $19,200,0002 +Capital Additions Toggle the explanatory highlights and
3 -Cost Recovery (Depreciation) Taken 1,936,280 1,936,280 1,936,2804 -Basis in Partial Sales (Suggest turn off before printing)
5 =Adjusted Basis at Sale 17,263,720 17,263,720 17,263,720
CALCULATION OF CAPITAL GAIN ON SALE:
6 Sale Price 19,324,000 19,324,000 19,324,0007 -Costs of Sale 386,480 386,480 386,4808 -Adjusted Basis at Sale (Line 5) 17,263,720 17,263,720 17,263,7209 -Participation Payment on Sale
10 =Gain or (Loss) 1,673,800 1,673,800 1,673,80011 -Straight Line Cost Recovery (limited to gain) 1,673,800 1,673,800 1,673,80012 -Suspended Losses
13 =Capital Gain from Appreciation
ITEMS TAXED AS ORDINARY INCOME:
14 Unamortized Loan Fees/Costs (negative) (133,000) (133,000) (133,000)15 +
16 =Ordinary Taxable Income (133,000) (133,000) (133,000)
CALCULATION OF SALES PROCEEDS AFTER TAX:
17 Sale Price 19,324,000 19,324,000 19,324,00018 -Cost of Sale 386,480 386,480 386,48019 +Balance of Funded Reserves
20 -Mortgage Balance(s) 11,557,979 11,557,979 11,557,97921 -Participation Payments on Sale
22 =Sale Proceeds Before Tax 7,379,541 7,379,541 7,379,54123 -Tax (Savings): Ordinary Income at 35% of line 16 (46,550) (46,550) (46,550)24 -Tax: Straight Line Recapture at 25% of line 11 418,450 418,450 418,45025 -Tax on Capital Gains at 15% of line 13
26 =SALE PROCEEDS AFTER TAX $7,007,641 $7,007,641 $7,007,641
N BEFORE TAX IR Alternative 1 Alternative 2 Alternative 3
NU n $ n $ n $ T
T 0 (6,166,000) 0 (6,166,000) 0 (6,166,000) EE 1 393,473 1 393,473 1 393,473 R
R 2 404,674 2 404,674 2 404,674 N
3 416,256 3 416,256 3 416,256 AF 4 428,234 4 428,234 4 428,234 L
O 5 440,621 + 7,379,541 5 440,621 + 7,379,541 5 440,621 + 7,379,541IRR= 9.95% IRR= 9.95% IRR= 9.95% R
NPV= $0 NPV= $0 NPV= $0
AS @ 9.95% @ 9.95% @ 9.95% T
E ET AFTER TAX S
A Alternative 1 Alternative 2 Alternative 3
R n $ n $ n $ O
0 (6,166,000) 0 (6,166,000) 0 (6,166,000) FL 1 292,736 1 292,736 1 292,736
A 2 297,662 2 297,662 2 297,662 RN 3 296,455 3 296,455 3 296,455 E
R 4 294,826 4 294,826 4 294,826 TE 5 286,981 + 7,007,641 5 286,981 + 7,007,641 5 286,981 + 7,007,641 U
T IRR= 7.13% IRR= 7.13% IRR= 7.13% RN NPV= $0 NPV= $0 NPV= $0
NI @ 7.13% @ 7.13% @ 7.13%
Cap rate used on Sale = 9.% Cap rate on Sale = 9.% Cap rate on Sale = 9.%
IRR & NPV
n $0 (6,166,000)1 292,7362 297,6623 296,4554 294,8265 286,981 + 7,007,641IRR= 7.13%NPV= ($700,388)
@ 10.%
How much should I pay?
Impressed?
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
1st Mortgage 2nd Mortgage Improvements Personal Property
$13,300,000 Value $15,360,000
7.50% C. R. Method SL SL
20 Useful Life 39.0
10 In Service Date 1-Jan 1-Jan
12 Date of Sale 31-Dec 31-Dec
$107,143.89 12 Months % age 2.564%
$1,285,727 11.5 Months % age 2.457%
$266,000
1 2 3 4 5 6
1 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157
2
3 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157
4
5 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157
6
7 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157
8 $987,382 $964,222 $939,262 $912,365 $883,380
9
10 $377,395 $393,830 $393,830 $393,830 $377,395
11
12 $26,600 $26,600 $26,600 $26,600 $26,600
13
14
15 $287,823 $305,749 $342,291 $381,166 $438,973
16 $100,738 $107,012 $119,802 $133,408 $153,640
17 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348
18 $1,285,727 $1,285,727 $1,285,727 $1,285,727 $1,285,727
19
20
21
22 $393,473 $404,674 $416,256 $428,234 $440,621
23 $100,738 $107,012 $119,802 $133,408 $153,640
24 $292,735 $297,662 $296,455 $294,826 $286,981
Payments/Year
Periodic Payment
$6,166,000Equals Initial InvestmentPurpose of Analysis
October 24, 2013
MORTGAGE DATA
Prepared by
Cash Flow Analysis WorksheetProperty Name
Location
Type of Property
HIDDEN KAKES RETAIL
Size of Property (sf/units) Minus Mortgages103,000
-Annual Debt Service
NET OPERATING INCOME
-Interest-First Mortgage
$19,000,000
$200,000
$266,000
$13,300,000
Plus Acquisition Costs
Acquisition Price
Plus Loan Costs
-Tax Liability (Savings) (Line 16 )
CASH FLOW AFTER TAXES
NET OPERATING INCOME (Line 7)
CASH FLOW
-
-Interest-Second Mortgage
TAXABLE INCOME
Amortization Period
Loan Term
End of Year
POTENTIAL RENTAL INCOME
-Vacancy & Credit Losses
EFFECTIVE RENTAL INCOME
BASIS DATA
Acquisition Price
COST RECOVERY DATA
+Other Income (collectable)
GROSS OPERATING INCOME
Amount
-
-
-
TOTAL OPERATING EXPENSES
REAL ESTATE TAXABLE INCOME
Tax Liability (Savings) at 35%
-Cost Recovery-Personal Property
-Loan Costs Amortization
-Cost Recovery-Improvements
Acquisition Costs
Total Acquisition Basis
CASH FLOW BEFORE TAXES
Interest Rate
Date Prepared
Annual Debt Service
Loan Fees/Costs
-
Note: Do not enter any information on this sheet.All values are derived f rom the Input Sheet.
CCIM InstituteEquipping the world’s best minds in commercial real estate
1 End of Year: 1 2 3 4 5 6
2 Principal Balance - 1st Mortgage $13,001,656 $12,680,150 $12,333,686 $11,960,325 $11,557,979
3 Principal Balance - 2nd Mortgage
4 TOTAL UNPAID BALANCE $13,001,656 $12,680,150 $12,333,686 $11,960,325 $11,557,979
5 END OF YEAR 1 2 3 4 5 6
6 PROJECTED SALES PRICE (Rounded to nearest 000) $19,324,000
7 Basis at Acquisition $19,200,000
8 +Capital Additions
9 -Cost Recovery (Depreciation) Taken $1,936,280
10 -Basis in Partial Sales
11 =Adjusted Basis at Sale $17,263,720
12 Sale Price $19,324,000
13 -Costs of Sale $386,480
14 -Adjusted Basis at Sale (Line 11) $17,263,720
15 -
16 =Gain or (Loss) $1,673,800
17 -Straight Line Cost Recovery (limited to gain) (Line 9) $1,673,800
18 -Suspended Losses
19 =Capital Gain from Appreciation
20 Unamortized Loan Fees/Costs (negative) ($133,000)
21 +
22 =Ordinary Taxable Income ($133,000)
23 Sale Price $19,324,000
24 Cost of Sale $386,480
25 -Participation Payments on Sale
26 -Mortgage Balance(s) $11,557,979
27 +Balance of Funded Reserves
28 =SALE PROCEEDS BEFORE TAX $7,379,541
29 -Tax (Savings)on Ordinary Income (Line 22 x 35%) ($46,550)
30 -Tax on Cost Recovery Recapture (Line 17 x 25%) $418,450
31 -Tax on Capital Gain (Line 19 x 15%)
32 =SALE PROCEEDS AFTER TAX $7,007,641
CALCULATION OF CAPITAL GAIN ON SALE
ITEMS TAXED AS ORDINARY INCOME
CALCULATION OF SALE PROCEEDS
Cash Sale WorksheetMORTGAGE BALANCES
CALCULATION OF SALE PROCEEDS
CALCULATION OF ADJUSTED BASIS
Note: Do not enter any information on this sheet.All values are derived f rom the Input Sheet.
CCIM InstituteEquipping the world’s best minds in commercial real estate
EOY $ EOY $0 ($6,166,000) 0 ($6,166,000)1 $393,473 1 $292,735 2 $404,674 2 $297,662 3 $416,256 3 $296,455 4 $428,234 4 $294,826 5 $440,621 + $7,379,541 5 $286,981 + $7,007,641
IRR = 9.95% IRR = 7.13%
NPV @ = NPV @ 10.00% = ($700,388)
1 2 3 4 5 6$19,127,000 $19,258,000 $19,393,000 $19,533,000 $19,678,000$13,001,656 $12,680,151 $12,333,687 $11,960,326 $11,557,979
67.98% 65.84% 63.60% 61.23% 58.74%1.31 1.31 1.32 1.33 1.34
8.84% 8.90% 8.96% 9.02% 9.09%6.38% 6.56% 6.75% 6.95% 7.15%4.75% 4.83% 4.81% 4.78% 4.65%
8.84%11.31
28.29%
Before Tax Cash on Cash
Gross Rent Multiplier
After Tax Cash on Cash
Return on Asset
Effective Tax Rate
Value Using Acquisition Cap Rate
Measures of Investment PerformanceBefore Tax After Tax
End of Year
Debt Service Coverage Ratio
Loan BalanceLoan to Value
Acquisition Cap Rate
Input Cells Formula Cells
LegendCCIM InstituteEquipping the world’s best minds in commercial real estate
Investment Benchmarks
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24%
($2,000,000)
($1,800,000)
($1,600,000)
($1,400,000)
($1,200,000)
($1,000,000)
($800,000)
($600,000)
($400,000)
($200,000)
$0
Purchase
Lease
Discount Rate
Afte
r T
ax
Ne
t Pre
sen
t Va
lue
EOY 10 Sales Price $4,418,000
Discount Rate Sensitivity
6.15%
$15,
000
$15,
500
$16,
000
$16,
500
$17,
000
$17,
500
$18,
000
$18,
500
$19,
000
$19,
500
$20,
000
($7,000,000)
($6,000,000)
($5,000,000)
($4,000,000)
($3,000,000)
($2,000,000)
($1,000,000)
$0
Purchase Lease
EOY 10 Sales Price (000)
Aft
er T
ax N
et P
rese
nt V
alue
Discount Rate 9.00%
Sales Price Sensitivity
$20,069,653
Are they really interested or just
shopping?
Will they understand the terminology?
How do I get them to like me and trust me?
How do I get them to make a
decision?
Should I dig into the details or
keep it simple?
How much time will I need to
make my point?
Will they understand the
lingo?
What can I do to make this more
interesting?
REIWISE @ STDB.com
planEASE @ www.planease.com
The CCIM Millionaire Next Door
An astounding 85 percent of self-made millionaires in America admitted that they were no more intelligent or talented then others, but they “worked much harder”
than anyone else, for a much longer time.
The Millionaire Next Door, Stanley & Danko
What can I do?• Qualify and don’t waste anyone’s time• Let them know they’re important• Give your trust & earn their trust• Use all of your knowledge & skills• Avoid jargon• Read and understand your audience• Be brief (you can always elaborate)• Get them involved & use visuals• Ask for the order
Thank you for attending!
Steven R. Price, CCIMPrice Properties, Inc.
Colorado Springs, [email protected]