The following financial information shows the assumptions and outcomes of the purchase, renovation, and rental of the first property on Fifth and Pearl. No attempt has been made to discuss the implications of purchasing other buildings, since these will happen on a more ad hoc basis.
The following are conservative assumptions that will influence our financial projections.
The regular Break-even Analysis is not appropriate for this project, but the following text explains the Break-even chart.
Investors will receive 66% of the rental income from the property. It is estimated that this property will produce $2400 per month of rental. At maximum occupancy, the payout to investors will be fixed monthly cost of $1,600. The remaining $800 per month will be kept in a savings account to pay for general upkeep of the building and any unexpected repairs. It is estimated that routine bills and maintenance will be no more than $400 per month.
The following Profit and Loss table illustrates that VR will lose money in the first year, but in the second year, on this single property, the company will make a healthy return of 10% in 2002 and 15% in 2003.
The following Balance Sheet shows healthy cash flow that will enable VR to maintain the existing location at Fifth and Pearl and allow Doug and Sarah to purchase a second property in Portland in year two of the operation.
The Balance Sheet shows a healthy company with a positive net worth that will ensure future financial stability and the ability to grow through investment in other properties in the future.
The following table contains important ratios for the Single-family housing construction industry, as determined by the Standard Industry Classification (SIC) Index Number 1521.