REAL 4300 Fall 2017 Question 6 This is a 'Real Deal from Summer. Calculate the Maximum purchase price for this Rent House using the Financial Feasibility Model Formula using the attached form based on the following date! We do not care what asking price is for the Rent House) How much should we Pay, Borrow and Put as Down payment? 1. Asking $280,000 (what the seller is asking), Price Does Not Matter. (However, you calculate 2. 3. 4. max offering price-showing your work on sheet) House will lease for $2.200/Month (Worth $2,500 per month but we want to be conservative) Please assume 10% vacancy Expenses are as follows: (based on 90% stable income) slow myornopay per year. Property Management fee of 6% of Gross income per year. b. Taxes, Insurance and Repairs total $9,300 per year 5. Debt coverage ratio (DCR) is assumed to be 1.3 6. Debt terms are annual payments, 15 years, at 5.75% FIXED, with a loan constant(K) 0.101288 Return on Equity (ROE) is required to be 5%. 7, Show work on sheet: What is Max Loan? $ What is Max Down payment/Equity?$ What is Total Offering Price? s_ Question 7 Same property and basic data (rent, income, vacancy) you bought in Question 6. What is your Resale Price/when you sell it/resell it based on an arranged average loan at 1.2 DCR and 30-year investment loan at 4.65% annual payments, and a loan constant at .06248? You also offer the buyer a 5% equity yield! All other data and assumptions being equal. Can/Could you make any $ doing this deal? a. What is your resale price? (Now Buyers Down Payment plus Loan) b. How much pretax profit could you/did you make? (Assume No Tax a Closing Facts) Resale Price -Purchase Price) ( Profit/Spread "Note: Same Property Market and Expenses Terms, Same Strong Tenant, and Same Valid Researched Costs/Assumptions and Rent Key)