You currently live at Boardwalk and are considering taking a mortgage out on your property to pay off several rental properties that you own.The bank has approved you for a 12 year loan at 2.79% and up to $150,000 borrowed.Your goal would be to pay off 4 of your rentals.You currently have the following rental properties in your portfolio:

1.St Charles Place: 6.125% interest, 30 year, original loan amount 50,000.You just made payment #109

2.Marvin Gardens: 4.75% interest, 30 year, original loan amount 44,000.You just made payment # 116

3.Tennesse Ave: 6.75% interest, 10 year, original loan amount 52,000.You just made payment #77

4.States Ave: 5.75% interest, 15 year, original loan amount56,000.You just made payment #98

5.Virgina Ave: 6.25% interest, 30 year, original loan amount 48,000.You just made payment #116

6.St. James: 3.75% interest, 10 year, original loan amount 55,000.You just made payment #67

an amortization table

Use the payment(PMT) solver in excel to calculate payment.

Below are values for the St Charles Property

First get the monthly paymentPV = 50,000; I = 6.125/12 n =30*12 excel solve pmt = 303.81

Next step-Get into the amortization table to determine loan balance remaining

Scroll down the amortization table to payment 110.Check the beginning balance......you should see a value of 42,936.96.This would represent how much we would need to pay off the loan.

From the data above loan outstanding balance is $42,936.96.We need this information if we decide to pay off this loan

Next determine how much interest you would pay from now till the end of the loan.

33,318.14 in interest from pmt 110 to pmt 360 (either an equation for excel to solve or highlight the area .

From the data above we will use $33,318.14 as the total interest that we would have paid if we decided to keep this loan.Note if we pay this loan off the amount of interest saved will be $33,318.14 - (cost of interest we pay on new loan at 2.79% over 12 years).

Bringingit all together-

Analyzing monthly cash flow:

So if we paid off St Charles property our PV = 42,936.96 (amount outstanding on existing loan); I = 2.79/12 (interest rate on new loan); n = 12*12(time frame of new loan);cpt pmt = 351.21

Our cash flow change would result in paying out more cash today (i.e. a negative cash flow)

Old loan pmt is 303.81; new loan pmt is 351.21;result = - $47.40

Analyzing interest savings

PV = 42,936.96; I = 2.79/12; n = 12*12; excel solve pmt 351.21

Add interest from payments 1 - 144.INT = 7,637.40

So, under our existing loan we would pay an additional 33,318.14 in interest; if we choose to pay off the property we would pay 7,637.40 in interest.Therefore, our total interest saved over the term of the loan is $25,680.74.

For your solution I want to see a table with the following information.

Property name, current payment, outstanding balance, interest remaining, payment if we take new loan, interest paid if we take new loan,cash flow change in monthly payment, interest saved

As a business owner you want to review your options and see which one makes the most sense.

(required show all work)

1.Which combination of properties will result in the most amount of interest saved over the course of the loan?

2.Which combination of properties will result in the most benefit in cash flow today?

Remember......there is a limit to the amount that you can borrow.