This problem involves the underwriting of a mortgage for a six-story walk-up purchased in 2003 for $975,000 subject to a $600,000 mortgage. It consists of 26 apartments (104 rooms) and two stores occupied by a clothing boutique and a deli, respectively. All apartments have thee-panel windows and new water-saving toilets. Two of them have been gut-renovated, and another ten have modern kitchens installed by long-term tenants at their own expense. A financial summary is presented below: Residential Rents: $144,500 Commercial Rents: 34,800 $179,300 Expenses: 10% Allowance for Management/Vacancy $ _____ Real Estate Taxes 13,100 Water/Sewer (metered) 12,600 Heat ______ Allowance for Repairs 10,400 Painting/Supplies 5,600 Insurance 8,500 Common Area Electricity 6,000 Replacement Reserve 2,800 Super (free apartment for services) 0 ____________________ Recoveries: Real Estate Tax Pass-throughs 2,500 NET OPERATING INCOME $ __________ Please compute the following (a) Heating expense assume $250 per room per year (b) Net Operating Income (c) Capitalization Rate assume 75% loan-to-value financing @ 3.5% after-tax and equity rate of return@ 8%. (d) Maximum mortgage amount at 75% loan-to-value. Make sure that the debt service coverage is at least 1.25 X (e) Cash-on-cash return assuming a 30-year amortization of the new mortgage (remember that theres already been paydown on the existing financing)