Pro Forma help
For my real estate class I had to complete a pro forma over a property for sale in my area. I think I did it correctly but if there are any glaring mistakes I would love any corrections. My main concern is the selling price. Thank you all so much!

EDIT

The things in blue are my calculations everything else was given to me in the prompt

https://i.redd.it/lqb76a21ns121.png
[{"id": "eawjgof", "text": "Didn\u2019t take a thorough look, but did look at your sale price. I guess your concern is it being lower than Acq. Price. That\u2019s because you\u2019re acquiring at a 5% cap and selling at a 5.75% cap. \n\nIf this is a real world transaction you\u2019d first want to understand if assets of this type are actually trading at 5% caps to see if it\u2019s listed about what it should be. Also no one knows what cap rates will be in the future, but I think a lot of people assume a 50bps cap rate increase over the hold period so you could probably assume a 5.5% cap assuming similar assets actually are trading at a 5%. ", "replies": [], "depth": 1}, {"id": "eawjn5m", "text": "What\u2019s the product type being analyzed? Is it NNN?\n\nYour cash flow is odd to me in that the income does not grow each year and your expenses are so minimal. The resulting extreme NOI stability makes me question the product type. \n\nIf it is STNL/NNN, your exit cap may be too low depending on the lease structure. If it\u2019s a 10 year lease, a sale at year 6 presents non-renewal risk to the buyer that would need to be priced in. \nI don\u2019t play in the single tenant space enough to know what the correct risk pricing is there. My instinct is probably another 50-75bps of exit cap expansion. \n\nIf it\u2019s not STNL/NNN then your income assumptions probably need serious reconsideration. ", "replies": [], "depth": 1}, {"id": "eawsnfm", "text": "As I'm sure you're aware, this is a highly simplified PF. FYI, if you want to do REPE later on, I would advise against using this as a starting point if you're doing a case study or interview prep - seems like your prof gave you a very simple model to teach the math for returns metrics and to help you figure out how to contextualize them.\n\nHappy to give thoughts, but I don't think I can help too much based on this screenshot. I don't know what the assignment was, property type, where the assumptions at the top are coming from, or what the numbers in the upper left represent. \n\nYour initial investment ought to be negative - that's your capital outlay. Your other acquisition cost plug is 25k, and doesn't match the assumptions at the top.\n\n**Check your IRR math.** I'm not getting a positive IRR based on your CFBT numbers at the bottom. If you add your cashflows and sale price together, it's less than your purchase price! Something is wrong, and without knowing the rest of the assignment I can't say for sure, but I think it's your debt service. **Why is your debt service increasing every year?** I don't think this is a floating rate mortgage. Your payment should be the same in each period. That may improve the IRR.\n\nYour DSCR is very low, esp at 60% LTV. Looks hardcoded, but that's a very concerning DSCR especially at a 5% coupon and 60% LTV. Zero idea why they're having you back into a loan amount this way (funds don't typically think about their leverage in terms of DSCR for an initial acq assessment), but so be it.\n\nAs others mentioned, your reversion cap is 70 bps on top of your going-in cap after only 5 years. That is a lot of lost value in just 5 years. For perspective, I usually add 25 bps to the reversion for a 5 year hold for core deals. Again, probably not your call but that's a bad sign.\n\nWhy is the cashflow taking capital reserves above NOI? It looks like that's what the assignment is asking, but that's not a typical way of doing it in my experience.\n\nPersonal pet peeve, but I would show your IRR to the hundredths place consistent with your other figures.\n\nAll in all, good stuff! Takes guts to go out on a limb and ask randos for help. Feel free to PM me in the future if you want internship or interview advice.", "replies": [{"id": "eawt1nc", "text": "I had to submit the assignment but thank you so much for your comment! I would definitely love to utilize you for advice in the future. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "eaxhf2u", "text": "You forgot to account for the fact that about 700k has already been amortised from the loan (on resale date). Therefore, the Loan Balance deduction upon resale should be about 5.3M instead of 6M.", "replies": [], "depth": 1}]