(Primarily Ch. 5)

Given Scenario:

20 apartments that rent for $1000 per month each

5% Vacancy rate

Expenses: Variable expense ratio of 20% of effective rent plus fixed expenses (not including mortgage) of $22,400

Interest: 5%

Monthly Debt Service $9900

1. Identify the Sales price for the property based on the following capitalization rates:

A. 8%

B. 10%,

C. 12%

D. Which is better for the buyer? The seller?

2. Identify the break-even point in rent? Units?

3. If the above complex is purchased for the price in answer 1 A, and the bank will loan based on a 75% LTV, how much must the buyer invest?

4. What is the first year ROI based on Net Cash Flow before depreciation and taxes. The investment used is the answer to Question 3 above.