Inputs:

Loan to Value RaTo =

0.65

Land to Value RaTo =

0.30

Depreciable Life =

25

years

Mortgage Interest =

5%

Interest Only Loan

Re =

9%

Going Out Cap Rate =

8.2%

Income ax Rate =

35%

Capital Gains ax Rate =

25%

Year 0:

Year 1:

Year 2:

Year 3:

Year 4:

Year 5:

Year 6:

Building Purchase

$670,000

NOI

$48,000

$52,000

$55,000

$57,000

$60,000

$61,000

$62,500

DS

BCF

axes

ACF

(1) QuesTons:

a) How much Is the Going In Cap Rate?

b) How much is the Gross Sale Price?

c) How much is the NPV for the equity investor?

d) How much is the IRR for the building?

e) Does this investment have favorable leverage?

f) Would an investor invest in this project? Explain.

2) Let's suppose that you are a landlord negotiating a rental contract with tenant ABC. This tenant is willing to pa

A. How is such a rental contract called?

B. What is the beneft For you as the landlord For such a lease?

6) Real Estate investors typically take on more leverage to enhance their returns. However, it also makes their inv

A. Explain why their investment becomes more risky.

B. Discuss in detail one metric that lenders use to gauge this risk.

7) Create a simple spreadsheet that would calculate the Fnancial beneFts of making a building (more) sustainable

Calculate using a 10-year time period. HINT