An investor is considering the acquisition of a $$distressed property$$ which is on Northlake Bank$$s REO list. The property is available for $$203,600$ and the investor estimates that he can borrow $$160,000$ at $4\mathrm{.}5$ percent interest and that the property will require the following total expenditures during the next year:

Inspection $ $554$

Title search $1,108$

Renovation $13,000$

Landscaping $908$

Loan interest $7,254$

Insurance $1,854$

Property taxes $6,054$

Selling expenses $8,000$

Required:

a$.$ The investor is wondering what such a property must sell for after one year in order to earn a $20$ percent return $($IRR$)$ on equity.

b$.$ The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it $($starting in year $2)$ and realize a net cash flow before debt service of $$2,280$ per month. However, he would have to make an additional $$8,280$ in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year $2$ in order to earn a $20$ percent IRR on equity?

Use excel spreadsheet to show work and provide the answer.