Homework Assignments

The following homework assignments were designed to help you familiarize yourself with the powerful features of our software.  These assignments will walk you through common scenarios and will help you gain a greater understanding of how to use your 6.5 software in your Real Estate business.

Short Term versus Long Term Investment

1. To begin this assignment, open your Property Tracker module.
2. Add a new Property into your list and enter dummy data such as, "123 Some Street, Al, 33333" and set the status to "Prospecting".  When you have finished entering the information, click the button labeled "Add".  At this time the new property will appear in your property list.
3. Click on the Mortgage Details Tab and enter in both loans as shown below:

   Loan Amount	Interest Rate	Term	P & I	Type
   208,000	7%	360	$1,383.83	Standard
   42,000	10%	180	$350.00	Interest Only

4. Navigate to the Purchase Information Tab and enter the following information:

   Carrying Time	6 Months		This means that we expect to sell this property in 6 months.
   Down Payment	10,000		This is the amount we are putting down on this property.
   Purchase Price	260,000
   Estimated Sales Price	340,000		This number is what we think the property will sell for after all of the construction has been completed.
   Market Value	320,000		What is the Market Value of the house using any appraisal method (Comparables, Market Rent, etc.)
   Closing Cost Buy	1.5		Percentage we the buyer are paying.
   Closing Cost Sell	0		We are not selling this property so we leave this blank.
   Sales Commission	6		In this scenario we are paying sales commission to a broker and their rate is 6%.
   Investor Participation	0
   Construction Estimate	15,000		This is the estimated amount of construction work we will have on this property.
   Misc. Expense	600		Miscellaneous Expenses include: water, electricity, phone, cable, etc. (take the monthly misc. expense and multiply it by the carrying time)
   Annual Taxes	2,000		What are the annual taxes for the property.
   Annual Insurance	1,500		What is the annual insurance for the property.

5. After entering the data above you should have a Gross Profit Percentage of 8.25% or $23,326.00.  That is how much we will make and earn on our money if we do this deal as it stands.
6. For drill, lets say we want to make a higher return on our money, say 10%.  In the text box under Maximum Offer we will place 10.  The software will then tell us that in order to make 10% on our money we will need to offer no more than $260,815.45 for this property.  Purchasing this property for anything less than this figure will result in a 10% or greater return on our money.
7. Next we will need to enter in our Mortgage Details for this example.  We are going to use 100% financing through an 80/20 loan minus the $10,000 already put down. 
8. Now that we have entered the Mortgage Information we can move on to the all new Income and Expenses Tab (formerly the Edit CFA data button on the Property Tracker Tab). 

   For expenses, enter in the following information.

   Taxes	$150
   Insurance	$150

9. For non-rent income, enter in the following information.

   Washer & Dryer	$75

10. For tenant information, add a record for a tenant named "Joe Schmoe" and enter the monthly rent to be $2,000.
11. For IntelliZones settings, make sure that the following information is entered:

    % Depreciable	80
    No. of Years	27.5
    1st Yr. Improvements	0
    Other Income	0
    Reserve (Expense)	0
    Maintenance	0

Questions - View the Answers

1. What is the Cash on Cash Return in year 5?
2. Using the Short vs. Long Analysis from the Strategy drop-down, how many years will it take for the long term investment to out-perform the short term investment?
3. At this point you need to take into consideration your personal preference/needs from the investment to decide the strategy you would like to take.  Based on your preference, should you invest in this property for the short term or long term?