Suppose your lender agrees to an 80% LTV, the cost to borrow $1 at 8% for 30 years equals $0.0888 per year, NOI = $20,000, annual debt service = $7,000 and your down payment was $100,000. Using the Band of Investment Approach to estimating your cap rate, the weighted cost of equity would equal approximately:

7.1%

2.6%

8.88%

9.7%