Posted by JAG on September 30, 2003 at 17:00:04:
The purchase price is approximately $400,000 with a 300,000 mortgate, 25 years at 5.75%. This works out to yearly payments of approx. $23,000 on the mortgage.
The person putting this deal together has budgeted 3% of revenues for reserves (that’s approx. $2,000). I agree that this seems potentially unrealistic.
The 8% return would be cumulative (but simple). In my current counter-offer, I proposed 12% simple cumulative, with a 12% or 13% compounded catch-up.
4.In the current proposal, the management fee would come before my preferred return. However, the $45k number I gave for NOI does not include the mgmt fee (since it’s an open question whether it should come above or below that line). Thanks.