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Susan is considering buying a class-A office building in Miami. The acquisition price is $2,500,000. She expects the first-year potential gross income (PGI) to be
Susan is considering buying a class-A office building in Miami. The acquisition price is $2,500,000. She expects the first-year potential gross income (PGI) to be $300,000. Based on her pro forma analysis, vacancy and collection losses comprise 5% of PGI, and operating expenses and capital expenditures will consume 40% of EGI. The interest rate on her commercial mortgage is 6%, with monthly payments and 25-year amortization schedule. If the lender requires the DCR to be 1.35 or greater, what is the maximum loan amount?
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