Suppose that you are considering an investment in an apartment building. Use the information provided below to answer the questions that follow:

Type of Property: Apartment building

Number of Units: 30

Average Rent (Year 1): $1,500 per unit per month

Annual Growth in Average Rent: 5%

Vacancy and Collection Losses: 5% of Potential Gross Income

Other Income (Year 1): $50 per unit per month

Annual Growth in Other Income: 3%

Operating Expenses: 35% of Effective Gross Income

Capital Expenditures: 4% of Effective Gross Income

Selling Expenses: 5% of Future Selling Price

Going-Out Cap Rate: 6.5%

Expected Purchase Price: $5.25 million

Loan Terms: Loan Amount: 85% of Purchase Price

Interest Rate: 4.5% per year with monthly payments and monthly compounding

Amortization Term: 30 years

1. What is the annual debt service in year 1?

2. What is the before cash flow in year 1?

3. What is the annual debt service in year 2?

4. What is the before tax cash flow in year 2?

5. What is the remaining mortgage balance at the end of year 5?

6.

If NOI in year 6 is $412,115.62. What is the Before-Tax Equity Reversion (BTER) at the end of year 5 (Round your answer to two decimal places)?