14-15

Question \#5: You come across a Bed and Breakfast (a type of boutique hotel-like property) that you can purchase for $3.2 million. The lender has agreed to originate a loan on what you consider to be fairly reasonable terms: 7.50% interest rate, a 30-year amortization, and annual payments. Your lender hasn't mentioned their constraints regarding Debt Service Coverage Ratio, Loan-to-Value, or Loan-to-Cost yet. Your goal is to borrow $2.2 million which you'll service using the Bed and Breakfast property's stabilized net operating income of $300,000 per year. Q5(a). What is the Loan Constant for this proposed loan? $0.0801 $0.0963 $0.0709 $0.0847 Q5(b). What Debt Service Coverage Ratio are you implicitly offering the lender for your proposed $2.2 million loan? Show your work