Holding period is 10 years, not 7. 
3. Calculate the Pre-Tax Cash Flow, Net Present Value (NPV) and Internal Rate of Return (IRR) Building Size 30,000 $175 SF $1,000,000 psf Land Cost equals Appraised Value Loan-To-Cost (LTC) Construction Costs $5,250,000 Total Appraised Value $1,027,500 Year 1 Potential Gross Rent Construction Financing $34 100% Rent psf Vacancy Factor 5% Holding Period Rent & Expenses Escalation Take Out Financing Interest Rate 7 0.8 LTV-Land Construction years per year beginning year 2 5.25% 3% 0.44% per year per month Full Amortization over 20 240 months years Operating Expenses Property Management Year 1 Developer pays cash for portion of loan not covered by LTV of Potential Gross Rent psf/year psf/year psf/year 3.5% Property Taxes Property Insurance Property Maintenance $4 $1 $127,500 $0 $0 $2,45 Property Sale@ End of Year Gross Rent Multiplier (GRM) 10 9 5.25% Discount Rate 4 8 Years 1 2 6 7 10 Equity Contribution Potential Gross Rent Less Vacancy Effective Gross Rent Less Operating Expenses Property Management Property Taxes Property Insurance Property Maintenance Net Operating Income Less Debt Service Pre-tax Rental Cash Flow Sale of Property Gross Sale Proceeds Less Loan Payoff Net Sale Proceeds Pre-Tax Cash Flow Internal Rate of Return (IRR) = Net Present Value (NPV) Pre-Tax Pre-Tax 3. Calculate the Pre-Tax Cash Flow, Net Present Value (NPV) and Internal Rate of Return (IRR) Building Size 30,000 $175 SF $1,000,000 psf Land Cost equals Appraised Value Loan-To-Cost (LTC) Construction Costs $5,250,000 Total Appraised Value $1,027,500 Year 1 Potential Gross Rent Construction Financing $34 100% Rent psf Vacancy Factor 5% Holding Period Rent & Expenses Escalation Take Out Financing Interest Rate 7 0.8 LTV-Land Construction years per year beginning year 2 5.25% 3% 0.44% per year per month Full Amortization over 20 240 months years Operating Expenses Property Management Year 1 Developer pays cash for portion of loan not covered by LTV of Potential Gross Rent psf/year psf/year psf/year 3.5% Property Taxes Property Insurance Property Maintenance $4 $1 $127,500 $0 $0 $2,45 Property Sale@ End of Year Gross Rent Multiplier (GRM) 10 9 5.25% Discount Rate 4 8 Years 1 2 6 7 10 Equity Contribution Potential Gross Rent Less Vacancy Effective Gross Rent Less Operating Expenses Property Management Property Taxes Property Insurance Property Maintenance Net Operating Income Less Debt Service Pre-tax Rental Cash Flow Sale of Property Gross Sale Proceeds Less Loan Payoff Net Sale Proceeds Pre-Tax Cash Flow Internal Rate of Return (IRR) = Net Present Value (NPV) Pre-Tax Pre-Tax
