Property Assumptions:

Purchase Price: $4,000000

Year 1 PGI: $600,000

PGI Growth Rate (Annual): 3%

Annual Vacancy and Collection Loss (VCL): 5%

Operating Expenses (OER): 35%

Terminal Capitalization Rate for Sales Price .09 Capitalize NOI (Year 4)

Anticipated Holding Period: 3 Years

Maximum LTV: 70%

Interest Rate: 5%

Amortization Period: 30 Years

Payments Per Year: 12

Discount (Hurdle) Rate (Unleveraged & levered): 15%

1. What is the Going In (aka overall) Capitalization Rate?
2. What is the Cash on Cash (BTCF) for Years 1-3?
3. What is the Mortgage Constant?
4. Based on the NPVs and IRRs (unleveraged and leveraged, hurdle rates), do you recommend purchasing this property? Please explain.