Commercial Real Estate Finance Project
Essay Preview: Commercial Real Estate Finance Project
Report this essay
I decided to purchase five properties in the Chicago, Illinois area utilizing the 10,000,000 at 7% annual interest rate assuming full price offer.
The closing costs for commercial properties usually run 2-8% of the purchase price depending on the size and type of commercial property and include appraisal, underwriting fees, lenders origination fees, application fees, underwriting and document preparation charges, attorneys fees, survey, title insurance, escrows for insurance and taxes, etc. Appraisals are very detailed and can cost up to six thousand dollars because the appraiser must use several different valuation methods to determine the value of a property. Environmental inspections or insurance are often necessary and may cost from several hundred to several thousand dollars as well. For the properties selected the closing costs ran between 2-3.5%
7337 S. South Shore Dr; Chicago, IL 60649 the purchase price is $975,000.
For all the properties listed the closing costs estimate that I received was roughly 2-4% of the purchase price; 7337 S. South Shore Dr is 3.5%. Taxes $1529.83/month; insurance paid by tenants as mandated by association prior to signing lease.
$975,000 * 3.5% = $34125.00 CLOSING COSTS
Monthly Mortgage payment will be (30yr) $8016.53 PIT or $96198.36/year
Monthly Anticipated Gross Rents $18,510.00 or $222,120.00/year
Net Operating Income for the year: $64,619.00
With my monthly annual PIT being $96,198.36; almost $30k higher than my NOI; Id still purchase this property. After speaking with the agent I found out that the high annual expenses was due to the properties being vacant as of right now. Anticipated expenses would normally include maintenance upkeep and vacancy rate; etc.. Thus the NOI would be considerably higher than PIT at 60% occupancy making this a good buy especially in this high rental area.
Multi Family 5+
List Price:
$975,000
Address:
7337 S South Shore Dr , Chicago, Illinois 60649
Total # Units: 27 LAKE FRONT CONDOS
Gross Rental Income:
$18,510 Gross Rental Multiplier:
6 Total Annual Exps:
157501
Annual Net Operating Income:
$64,619
Total Monthly Income:
18510 Tax Amount:
18,358
Net Oper Income Year:
2010 Total Annual Income:
222120 Tax Year:
2009 Cap Rate:
7600 S. Kingston; Chicago, IL 60649 the purchase price is $3,350,000.
For all the properties listed the closing costs estimate that I received was roughly 2-4% of the purchase price; 7600 S. Kingston it is 2%. Taxes $608.33/month; insurance 583.33/month.
$3,350,000 * 2% = $67000.00 CLOSING COSTS
Monthly Mortgage payment will be (30yr) $23,479.29 PITI or $281,751.48/year
Monthly Anticipated gross rents $28,250.00 or $346200.00/year
Net Operating Income for the year: $327,100.96
With my annual PITI being $281,751.48 and NOI $327,100.00; this is a definite buy.
Multi Family 5+
MLS #:
07546342
List Price:
$3,350,000
Status:
List Date:
06/04/2010
Orig List Price:
$3,350,000
Directions:
7600 S. Kingston; Chicago, IL
Dimensions:
100X125
Remarks: BRAND NEW REHAB. NEW: PLUMBING, ELECTRIC, WINDOWS, INDIVIDUAL HEAT AND MUCH MORE. FEATURES LAUNDRY IN UNITS, CUSTOM CABINETS WITH GRANITE COUNTER TOPS. MINS FROM LAKE SHORE DR. AND METRA. MOST TENANTS HAVE LEASE WITH OPTION TO BUY.
Total # Units:
Apartment Info
# Units
Rooms
Bedrooms
Baths (F/H)
Monthly Income Range (Min-Max)
Type 1
Type 2
Type 3
Type 4
Annual Net Operating Income:
$326,900
Janitor Expense ($/src):
$3,600
Water Expense ($/src):
$3,500
Repairs/Decor Expense ($/src):
$3,000
Tax Amount:
$7,000
Fuel Expense ($/src):
$3,600
Scavenger Expense ($/src):
$2,400
Other Expense ($/src):
Tax Year:
Electricity Expense ($/src):
$3,000
Insurance Expense ($/src):
$7,000