Impact Realty Advisors

An Example of a Purchase

Real estate can be purchased for cash or a portion of the purchase price can be financed. Impact Realty has illustrated 2 scenarios for the purchase of one of its properties. The scenarios both assume a purchase price of $60,000. The 2 illustrations show (1) an all cash purchase, and (2) a purchase with a down payment of 20%.

Both examples assume that: (1) Impact Realty leases the house for you for $455 monthly ($5,460 annually), (2) Home Owner/Investor of Houses pays all real estate taxes, all assessments, all insurance and all operating expenses associated with the house. Your involvement is limited to collecting 12 monthly checks each year in the amount of $455 each.

*** An All Cash Purchase ***

Purchase price	$60,000
Cash needed to close	$60,000
Monthly payment to you	$455
Annual lease payments to you ($460 x 12)	$5,460
Annual cash on cash return ($5,460/$60,000)	9.10%

Notes:

1. The returns depicted do not consider income tax savings or appreciation which could result in a greater return for you.
2. ALL expenses associated with the real estate (i.e. real estate taxes, assessments, insurance, maintenance etc.) are paid by Home Owner/Investor.
3. Your total involvement each year consists of receiving 12 checks of $455 each.

*** Financing with 20% Down ***

Purchase price	$60,000
Down payment	$12,000
Cash needed to close Down payment Closing costs	$12,000 Up to 2% paid by seller
Total cash needed to close	$12,000 + Buyer Closing Costs
Monthly principal and interest payment ($48,000 @ 6% - 30 year amortization)	$288
Annual mortgage payments (12 x $288)	$3,456
Monthly lease payment to you	$455
Monthly cash flow ($455 - $288)	$167
Annual lease payments to you (12 x $455)	$5,460
Annual mortgage payments (12 x $288)	$3,456
Annual positive cash flow	$2,004
Annual cash on cash return ($2,004/$12,000)	16.7%
Equity build up (amount that you have reduced your mortgage) First year ($48,000 - $47,411)	$589
Total return for first year (cash on cash + equity build up) ($2,004 + $589)	$2,593
Total return First year ($2,593/$12,000)	21.6%

Notes:

1. Interest rates are subject to changes in market conditions.
2. The monthly mortgage payment is computed as follows: $48,000 @ 6% interest with a 30 year amortization.
3. Equity build up and thus total return will increase each year as a greater portion of the mortgage payments are applied to principal.
4. The returns depicted do not consider income tax savings, appreciation, or buyer closing costs.
5. Buyer's closing costs will vary from lender to lender.
6. All expenses associated with the real estate (i.e. real estate taxes, assessments, insurance, maintenance etc.) are paid by Home Owner/Investor.
7. Your total involvement each year consists of receiving 12 checks of $455 each.