Question
A property that can be purchased for $1.7 million has an expected first year NOI of $190,000. An investor is considering two loan alternatives: LOAN
A property that can be purchased for $1.7 million has an expected first year NOI of $190,000. An investor is considering two loan alternatives:
LOAN A:
A 70% loan-to-value ratio, with interest at 7.5% per annum. The loan will require level monthly payments to amortize the principle over 20 years.
LOAN B:
An 80% loan-to-value ratio, with interest at 8% per annum. This loan will require level monthly payments to amortize the principal over 25 years.
Fore each loan, determine:
A. The expected before-tax cash flow (NOI minus annual debt service) as a percentage of the equity investment.
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Advanced Financial Accounting
Authors: Thomas H. Beechy
5th Edition
0131236997, 9780131236998
