Assumptions 1st loan Asssumption 2nd loan:

Loan Amount (PV) $1,050,000 Loan Amount $200,000

Loan Amortization (months) 300 Loan Term 60
Interest Rate (3.75%) 0.31% Interest Rate 0.0041666667
Loan Term (months) 60 FV 0
FV 0 Payment -$3,774.25
Payment -$5,398 Annual Payments -$45,290.96
Annual Payment -$58,353.00
Total Loan Repayment -$1,619,513.28
Amount due at loan maturity? -$1,295,610.62

DCF Model Year 0 Year 1 Year 2 Year 3 Year 4

Expected annual rent increase 2% 2% 2% 2%
1st floor $ 33,600.00 $ 34,272.00 $ 34,957.44 $ 35,656.59
2nd floor $ 42,000.00 $ 42,840.00 $ 43,696.80 $ 44,570.74
3rd Floor $ 43,200.00 $ 44,064.00 $ 44,945.28 $ 45,844.19
4th floor $ 38,400.00 $ 39,168.00 $ 39,951.36 $ 40,750.39
Gross Potential Rents $ 157,200.00 $ 160,344.00 $ 163,550.88 $ 166,821.90
Allowance for vacancies (5%) $ 7,860.00 $ 7,860.00 $ 7,860.00 $ 7,860.00
Net Rental Income $ 149,340.00 $ 152,484.00 $ 155,690.88 $ 158,961.90

Property Purchase
Real Estate Taxes $ 14,645.00 $ 14,645.00 $ 14,645.00 $ 14,645.00
Operating Expenses
Heat $ 2,200.00 $ 2,200.00 $ 2,200.00 $ 2,200.00
Electricity $ 1,500.00 $ 1,500.00 $ 1,500.00 $ 1,500.00
Water $ 1,200.00 $ 1,200.00 $ 1,200.00 $ 1,200.00
Insurance $ 3,100.00 $ 3,100.00 $ 3,100.00 $ 3,100.00
Janitor $ 1,800.00 $ 1,800.00 $ 1,800.00 $ 1,800.00
 Management @ 5% $ 7,467.00 $ 7,467.00 $ 7,467.00 $ 7,467.00
Repairs @ 5% $ 7,467.00 $ 7,467.00 $ 7,467.00 $ 7,467.00
Structural Reserve @ 5% $ 7,467.00 $ 7,467.00 $ 7,467.00 $ 7,467.00
rying costs during 6 month period $ 36,010.00
Bank fees $ 2,000.00
Origination Fee $ 10,500.00
Tax escrow $ 2,441.00
Acquisition legan and closing $ 1,500.00
Title Insurance $4,000
Down Payment $ 240,000.00
Total Operating Expenses $ 292,010.00 $ 46,846.00 $ 46,846.00 $ 46,846.00 $ 46,846.00

Net Operating Income $ 102,494.00 $ 105,638.00 $ 108,844.88 $ 112,115.90

N.O.I./cost 5.51% 5.68% 5.85% 6.03%
Capex
Loan Principal -$103,643.96 -$103,643.96 -$103,643.96 -$103,643.96

Cash Flow (with sale proceeds) -$ 288,010.00 -$ 1,149.96 $ 1,994.04 $ 5,200.92 $ 8,471.94
Terminal Value
-$ 288,010.00 -$ 1,149.96 $ 1,994.04 $ 5,200.92 $ 8,471.94
IRR 11.84%

Sources and Uses Statement:

Uses
Renovations $450,000
rying costs during 6 month period $ 36,010.00
Bank fees $ 2,000.00
Origination Fee $ 10,500.00
 Tax escrow $ 2,441.00
Acquisition legan and closing $ 1,500.00
Title Insurance $4,000
Down Payment $ 240,000.00
Total $746,451
Sources
Seller Financing $200,000
Mortgage $1,050,000
Equity $240,000
Total: $1,490,000

The Spread
Expect Cap Rate 7%
Actual Cap Rate 6.39%
Spread 0.61%

Expected Profit from sale at end of year 5

Sale Price (6.39% Cap Rate) $ 1,859,513.28
Selling Costs (5%) $ 92,975.66
Loan Repayment -$1,295,610.62
Sale Proceeds $ 470,926.99

Or
Year 5 Year 6
2% 2%
$ 36,369.72 $ 37,097.11
$ 45,462.15 $ 46,371.39
$ 46,761.07 $ 47,696.29
$ 41,565.39 $ 42,396.70
$ 170,158.34 $ 173,561.50
$ 7,860.00 $ 7,860.00
$ 162,298.34 $ 165,701.50

$ 14,645.00 $ 14,645.00

$ 2,200.00 $ 2,200.00
$ 1,500.00 $ 1,500.00
$ 1,200.00 $ 1,200.00
$ 3,100.00 $ 3,100.00
$ 1,800.00 $ 1,800.00
$ 7,467.00 $ 7,467.00
$ 7,467.00 $ 7,467.00
$ 7,467.00 $ 7,467.00

$ 46,846.00 $ 46,846.00

$ 115,452.34 $ 118,855.50
6.21% 6.39%

-$103,643.96 -$58,353.00

$ 11,808.37 $ 60,502.50
Selling Price $ 470,926.99
$ 11,808.37 $ 531,429.49