2529 W Wethersfeild Rd, Phoenix, AZ

Real Estate Analysis Property Analysis

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This tool is provided “As Is”. All information is believed to be accurate, but not guaranteed. It is intended for the purpose of illustrative projections. The information provided is not intended to replace or substitute any legal, accounting, investment, real estate, tax or other professional advice, consultation or service. The author of this tool is not responsible nor liable for any damages arising from the use of the tool.

Executive Summary

Property Description

Name2529 W Wethersfeild Rd, Phoenix,
Address2529 W Wethersfeild Rd., Phoenix
Size1740 SF
Rooms3 bed. + 2 bath.
Purchase Price$ 60,000
Rent$ 800/month

Financing Overview

Purchase Price$ 60,000
Down Payment$ 12,000
Mortgage (30yr @ 5.50%)$ 48,000
Loan-to-Value (LTV)80.00 %
Closing Costs$ 2,500
Total Aquisition Cost$ 64,000

Income, Expenses and Cash Flow (Year 1)

Gross Operating Income (GOI)$ 9,120
Total Expenses$ 2,860
Net Operating Income (NOI)$ 6,260
Annual Debt Service$ 3,270
Rehabilitaion$ 0
Cash Flow Before Taxes (CFBT)$ 2,990
Income Tax Liability$ 0
Cash Flow After Taxes (CFAT)$ 2,990

Financial Analysis

Holding period of 15 years and discount rate of 10% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore doesn’t provide such exact information.

Net Present Value (NPV)$ 40,309
Internal Rate of Return (IRR)21.39 %
Cash on Cash Return18.69 %
Return on Equity (ROE)18.69 %
Capitalization Rate10.43 %
Gross Rent Multiplier (GRM)6.25
Debt-coverage Ratio (DCR)2.94
Operating Expense Ratio (OER)31.36 %

Resale Analysis

Sale Price in year 15 (Appreciation:1%)$ 69,658
Sale Proceeds (Before Tax)$ 31,427
Optimal Holding Period (based on NPV)30 years

Property Description

Price$ 60,000
Address2529 W Wethersfeild Rd., Phoenix, 85029, AZ
Year Built1963
Size1740 SF
Number of Bedrooms3
Number of Bathrooms2


Operation Effectiveness

The Annual Property Operating Data

Incomes% of GOI
Gross Scheduled Rent Income$ 9,600
Total Gross Income$ 9,600
Vacancy loss$ 480
Gross Operating Income$ 9,120100.00 %
Repairs$ 6006.58 %
Manager$ 96010.53 %
Prop_Taxes$ 7007.67 %
Prop_Insurance$ 6006.58 %
Total Expenses$ 2,86031.36 %
Net Operating Income$ 6,26068.64 %

Cash Flow (1st year)

Net Operating Income$ 6,26068.64 %
Annual Debt Service$ 3,27035.86 %
Rehabilitation$ 00.00 %
Cash Flow Before Taxes (CFBT)$ 2,99032.78 %
Income Tax Liability$ 00.00 %
Cash Flow After Taxes (CFAT)$ 2,99032.78 %

Gross scheduled income (GSI)

represents the total of monthly rents for the particular property, including the potential rents from vacant units and uncollectable rents.

Vacancy and Credit Loss

represents the part of the potential rental income that is lost because of unoccupied units or uncollectable rent from tenants.

Gross Operating Income (GOI)

is the actual income which is expected to be collected in the property.

Operating Expenses

are expenses necessary for maintaining the property and ensuring its continued ability to produce income (doesn’t include mortgage payments or depreciation).

Net Operating Income (NOI)

is simply the gross operating income minus operating expenses.

Operating Ratios

Operating Expense Ratio31.36 %
Break-Even Ratio63.47 %

Cash Flow

represents all the inflows and outflows of cash for a certain property (including mortgage payments). We can calculate cash flow before taxes (CFBT) or cash flow after taxes (CFAT) which is CFBT minus any tax liability arising from the operation of the property.

Operating Expense Ratio

is the ratio of the operating expenses to the gross operating income (GOI).

Break-Even Ratio (BER)

is another benchmark used by mortgage lenders. It estimates how vulnerable is a certain property to defaulting on its mortgage if part of the rental income is declined. Most of the lenders are looking for BER of 85% or less.

Financial Effectiveness

Financial Measures

Net Present Value$ 40,309
Internal Rate of Return21.39 %
Profitability Index3.52
House P/E Ratio2.56
Annual Depreciation$ 1,745

Holding period of 15 years and discount rate of 10% were used for calculation of NPV and IRR. The rest of the financial measures are for the 1st year only and therefore don’t provide such an exact information.

Net Present Value (NPV)

is probably the best measure of any investment thanks to its complexity. It takes into account all future cash flows including the selling price, and it converts all these amounts to their present values using discount rate required by the investor. Therefore in contrast from most of the measurements, NPV count fully with the time value of money. More information and example is on the blog.

Internal Rate of Return (IRR)

is a rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces NPV of zero.

Profitability Index

is very similar to NPV. It also calculates with the present values of future cash flows and discount rate, therefore it takes in account the time value of money. Profitability index is a ratio which shows if the present value of the cash flows is worth the initial investment.

House P/E Ratio

is often used when measuring other investment tools, such as stocks. The Real Estate P/E ratio counts with the initial investment and annual net operating income.

Investment Return Ratios

Cash on Cash Return18.69 %
Return on Investment22.44 %
Return on Equity18.69 %
Capitalization Rate10.43 %
Gross Rental Yield16.00 %
Gross Rent Multiplier6.25

Cash on Cash Return

is in fact equity dividend rate. It is a ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It is not an exact measurement of an investment, because it does not take in account the future value of money.

Return on Investment

is very similar to Cash on Cash Return, but also takes in account appreciation of the property in the first year.

Return on Equity

is one of the financial measures used as well on other types of investments. In Real Estate the return means cash flow after taxes (CFAT) and equity is the initial investment.

Gross Rental Yield

can be used for a particular property or also as a market indicator when using median values of rent and house prices. It is counted from gross scheduled rent and initial investment.

Capitalization Rate

is calculated as ratio of the net operating income and the value of the property. It is in fact the discount rate, used for discounting the future income to determine its present value.

Gross Rent Multiplier

is counted as a ratio of market value of the property and gross scheduled income.

Financing Overview and Analysis

Acquisition Cost
Purchase Price$ 60,000
Closing Costs$ 2,500
Loan Costs$ 1,500
Total$ 64,000
Financing% of Acq.
Down Payment + Costs$ 12,00018.75 %
Mortgage$ 48,00075.00 %
Loan to Value Ratio80.00 %
Debt Coverage Ratio2.94
Mortgage Amount$ 48,000
Length30 years
Interest Rate5.50 %
Monthly Payment$ 272.54

Long Term Financial Forecast


Operational Analysis
Gross Scheduled Income$ 0$ 9,600$ 9,990$ 10,499$ 11,035
Vacancy Loss$ 0$ 480$ 499$ 525$ 552
Gross Operating Income$ 0$ 9,120$ 9,490$ 9,974$ 10,483
Expenses$ 0$ 2,860$ 2,976$ 3,128$ 3,287
Net Operating Income$ 0$ 6,260$ 6,514$ 6,847$ 7,196
Mortgage Payment$ 0$ 3,270$ 3,270$ 3,270$ 3,270
Payment Interest Part$ 0$ 2,624$ 2,465$ 2,211$ 1,876
Payment Principal Part$ 0$ 647$ 805$ 1,060$ 1,394
Cash Flow
Rehabilitation$ 0$ 0$ 0$ 0$ 0
Cash Flow Before Taxes$ -16,000$ 2,990$ 3,244$ 3,576$ 3,925
Depreciation$ 0$ 1,745$ 1,745$ 1,745$ 1,745
Taxes$ 0$ 0$ 0$ 0$ 0
Cash Flow After Taxes$ -16,000$ 2,990$ 3,244$ 3,576$ 3,925

Resale Analysis

Resale Price Evaluation Methods

The property is sold after 15 years.

Appreciation (1.00%)$ 69,658
Cap Rate (10.43%) & NOI$ 68,968
Gross Rent Multiplier$ 68,968

Sale Proceeds


In the resale analysis we don’t count with taxes which might occur when selling the property. The tax laws for the resale are rather complex and subjected to frequent changes, and are different in every country.

Projected Selling Price$ 69,658
Costs of Sale (7.00%)$ 4,876
Mortgage Balance Payoff$ 33,355
Early Payoff Penalty (0.00 %)$ 0
Sale Proceeds Before Tax$ 31,427

Net Assets and Yield

Net Assets
Sale Proceeds Before Tax$ 31,427
Down Payment$ 12,000
Net Assets$ 19,427
Annual Net Assets$ 1,295
Average Cash Flow (After Taxes)$ 3,447
Average Annual Yield$ 4,743
Average Annual Return7.90 %

Optimal Holding Period based on NPV

Holding Period30 years
Max NPV$ 90,342

Sensitivity Analysis

Loan to Value ratio

Your current LTV ratio is: 80.00%.

80.00 %$ 40,30921.39 %
0%$ -6,2518.54 %
10%$ -3,3619.16 %
20%$ -4709.86 %
30%$ 2,42110.74 %
40%$ 5,31111.79 %
50%$ 8,20213.13 %
60%$ 11,09214.94 %
70%$ 13,98317.43 %
80%$ 16,87321.39 %
90%$ 19,76429.30 %

This sensitivity analysis is using the configured holding period, the length and interest rate of the first mortgage and discount rate of 10%. It counts only with a conventional type of loan.

Mortgage Ammortization (Length)

Your current mortgage ammortization is 30 years.

30$ 40,30921.39 %
5$ 4210.01 %
10$ 3,33811.62 %
15$ 5,95213.87 %
20$ 11,61217.68 %
25$ 14,84519.92 %
30$ 16,87321.39 %

This sensitivity analysis is using the loan amount and interest rate of the first mortgage and discount rate of 10%. It counts only with a conventional type of loan.


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