Allocating Capital Worksheet - Alternative Scenarios
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Allocating Capital Worksheet - Alternative Scenarios
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Background Note:
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The Housing Committee has had some discussion about the school buying an exisitng property such as the property at 368 Overlook listed at $2.8 million, or the Purple Gate property at 201 Mesa Rd listed at $3.8 million - to create housing for teachers. I think that amount of money could be better spent on purpose built housing, or even subsidising rents. The purpose of this spreadsheet was to be an aid in conversation with the ad hoc Housing Committee where alternative scenarios are explained.
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$2,500,000
Cash Available
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5%
Target Investment Return (amount withdrawn every year without reducing principal)
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Option 1 - Invest Principal to Buy a Multiunit Property (eg. Overlook Property)
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$2,500,000
Cash Available
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$2,500,000
Cost of Building
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$0
Remaining Cash for future
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Result (Assume Overlook property purchased for $2.5 million)
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School owns 3 units, of a specific size and type, and gets $60,000 annually from their $2.5 million investment.
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$3,000
Income from Master Unit - 3 bedroom apartment
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$1,750
Income from Outbuilding A - 1 bedroom apartment
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$1,750
Income from Outbuilding 1 - 1 bedroom apartment
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$6,500
Total Gross Monthly Income
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$1,500
Monthly Repairs/Improvements/Upkeep, etc.
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$5,000
Net Monthly Income
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x 12
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$60,000
Annual Income to School
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Analysis: only 3 families served, with inflexible housing sizes that may not match need. Won't pay principle back.
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Option 2 - Invest Principal in Portfolio and use interest to subsidize teacher/staff rent.
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$2,500,000
Cash Invested
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$125,000
Interest available to subsidize rents.
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Result
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School owns no units.
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School has money to subsidize rents in perpetuity.
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$500
Available per staff member
$1,000
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$500Staff 1$1,000Staff 1
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$500Staff 2 $1,000Staff 2
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$500Staff 3$1,000Staff 3
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$500Staff 4$1,000Staff 4
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$500Staff 5$1,000Staff 5
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$500Staff 6$1,000Staff 6
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$500Staff 7$1,000Staff 7
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$500Staff 8$1,000Staff 8
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$4,000
Monthly EXPENSE for School
$8,000
Monthly EXPENSE for School
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$48,000
Annual EXPENSE for School
$96,000
Annual EXPENSE for School
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Analysis: creates more competition with local families for rentals - further reducing enrollment.
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Option 3 - Invest Principal to Build Specialty Housing On Existing Campus
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$2,500,000
Cash Invested
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$0Land Cost
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8,333
New Square Ft of Living Space
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$300
cost per square foot to build
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$2,500,002
Total Cash Outlay
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Result
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School now has EIGHT 2 bedroom, income producing units of 925 sqft each
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$2,000Staff 1
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$2,000Staff 2
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$2,000Staff 3
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$2,000Staff 4
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$2,000Staff 5
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$2,000Staff 6
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$2,000Staff 7
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$2,000Staff 8
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$16,000
Monthly INCOME for School
$2,500,000
Paid back after upkeep in ~15 years
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$192,000
Annual INCOME for School
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Not enough space on Campus? Find a piece of land nearby.
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Not enough water meter bandwidth - buy the next available water meter for $350k and/or supplement with a well.
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Still not enough water - install catchment systems for all field irrigation
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Analysis: 8 purpose built homes, income from renters that eventually pays back the initial expense.
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350 Lauff Ranch Road Purchase - $2.25 million
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1.55 acres
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StructuresSq FtBedsCould beAdded CostCost SplitCash Down
Monthly Cost
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Home 115002br3/130k40%$290,000$4,475
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Home 210001 br2/120k25%$181,250$2,797
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Home 310001 br2/120k20%$145,000$2,238
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Home 47001 br1/115k15%$108,750$1,678
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PoolWell
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LanscapedNear School
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Sales Price2,250,000MonthlyAnnually
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Cash Down725,000--
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Loan at 5%1,500,000$8,000$96,000
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Property Tax
1.20%$2,250$27,000
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Insurance0.50%$938$11,250
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