Income Property Cash Flow Analysis; Before-Tax Cash Flows - HP 12c Platinum Reference Manual

12 Real Estate
12c platinum / 12C
RPN Keystrokes
gÂ
fCLEARG
200n12gC
1051.61ÞP
$74990+
Þ$
240n
129963.35MP
200000Þ$¼
12§

Income Property Cash Flow Analysis

Before-Tax Cash Flows

The before-tax cash flows applicable to real estate analysis and problems are:
•
Potential Gross Income
•
Effective Gross Income
•
Net Operating Income (also called Net Income Before Recapture)
•
Cash Throw-off to Equity (also called Gross Spendable Cash)
The derivation of these cash flows follows a set sequence:
1. Calculate Potential Gross Income by multiplying the rent per unit times the number
of units, times the number of rental payment periods per year. This gives the rental
income the property would generate if it were fully occupied.
2. Deduct Allowance for Vacancy and Rental Loss. This is usually expressed as a
percentage. The result is Rent Collections (which is also Effective Gross Income if
there is no "Other Income").
3. Add "Other Income" such as receipts from concessions (laundry equipment, etc.),
produced from sources other than the rental office space. This is Effective Gross
Income.
4. Deduct Operating Expenses. These are expenditures the landlord-investor must
make, by contract or custom, to preserve the property and keep in capable of
producing the gross income. The result is the Net Operating Income.
5. Deduct Annual Debt Service on the mortgage. This produces Cash Throw-Off to
Equity.
12c platinum
ALG Keystrokes
gÂ
fCLEARG
200n12gC
1051.61ÞP
$+74990³
Þ$
240n
129963.35MP
200000Þ$¼
§12³
Display
Number of periods and
monthly interest rate.
Monthly payment.
Present value of
-165,776.92
payments plus cash
advanced.
Monthly payment
1,693.97
received by lender.
Annual interest rate paid
9.58
by borrower.
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