- 19 -
percent. We refer to this payment as the rental deficit
contribution.
The rental purchase agreement also provided, as a
condition to the purchaser's obligation to purchase the
properties, that the "purchaser shall have obtained an
appraisal of each of the Properties by a FNMA/FHLMC
qualified appraiser * * * which shall reflect the value
of each Property equal to or greater than the purchase
price applicable to that Property".
EPIC made the following internal cash-flow analysis
of the transaction with Fox & Jacobs:
Fox & Jacobs, Inc. Year 1 Year 2 Year 3 Year 4Total
Builder lease payments -0- -0- -0- -0- -0-
Tax, ins., HOA reimburse-0- -0- -0- -0- -0-
Tenant rental $48,740 $49,659 $53,632 $57,922 $209,953
Rental deficit contribution69,190 -0- -0- -0- 69,190
Interest income 6,556 3,935 1,312 -0- 11,803
Total revenue 124,486 53,594 54,944 57,922 290,946
First trust interest -62,922 -62,922 -62,922-62,922 -251,688
Tax, ins., HOA expense -7,920 -7,920 -7,920 -7,920 -31,680
Repairs & maintenance -2,247 -2,247 -2,247 -2,247 -8,988
Property management fee -562 -562 -562 -562 -2,248
Audit fee -3,360 -3,360 -3,360 -3,360 -13,440
Interest on EPIC advances-5,815 -5,815 -5,815 -5,815 -23,260
Total expenses -82,826 -82,826 -82,826 -82,826 -331,304
Anticipated cash deficit41,660 -29,232 -27,882 -24,904 -40,358
As a percent of purchase9.27 -6.5 -6.2 -5.54 -8.98
price--check Nos.
The above analysis is based upon the original plan to
purchase eight houses for $449,500. As shown above, EPIC
projected a cash deficit from that transaction at the end
of the fourth year of $40,358 or 8.98 percent of the
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