🏘️ Investment Case Study Summary: 3124 Pearl Dr, Fullerton, CA
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🔹 Property Overview
- Type: 4-Plex (Four 2 bed / 2 bath units)
- Location: Fullerton, CA (No strict rent control like Santa Ana)
- Purchase Price: $1,600,000
- Down Payment: $800,000
- Loan Terms: 30-year fixed @ 6.5% → $800,000 loan
- Annual Debt Service: ~$60,679
💵 Year 1 Income & Returns
- Gross Scheduled Income: $101,700
- Gross Operating Income: $99,094
- Operating Expenses: $35,274
- Net Operating Income (NOI): $63,820
- CAP Rate: 3.99%
- Cash Flow After Debt: $3,141/year
- Cash-on-Cash Return: 0.39%
- Annual Depreciation (27.5-year MACRS): $46,545
- Estimated Tax Savings (at 45%): $20,945/year
📈 5-Year Projection (Conservative)
Assumptions:
- Appreciation: 3% annually
- Rent Growth: 2% annually
- Depreciation & Tax Rate: Constant over time
Metric | 5-Year Value |
Final Property Value | $1,854,839 |
Final Year NOI | $70,462 |
Final Year Cash Flow | $9,784/year |
Total 5-Year Cash Flow | ~$36,794 |
Total 5-Year Tax Savings | ~$104,727 |
Appreciation Gain | ~$254,839 |
📊 Total Return | ~$285,568 |
Total ROI on $800k Down | ~35.7% |
Annualized ROI | ~7.1%/year |
🧾 Key Insights
- ✅ Break-even in Year 1, with gradual growth in cash flow
- ⚠️ Lower initial returns due to higher operating costs and lower CAP
- ✅ Strong upside via appreciation and tax efficiency
- ✅ Depreciation shields rental income from taxes (passive loss)
- 🔄 Passive losses carry forward (cannot offset W-2 income over $150k unless real estate professional)
- 🔁 1031 Exchange can defer capital gains tax upon sale