You are asked to present an investment analysis of a new small residential income producing property for sale to a potential investor. The asking price for the property is $1,250,000. Rents are estimated at $200,000 during the first year and are expected to grow at 3 percent per year for the next decade. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A 70 percent loan can be obtained at 11 percent interest for 30 years, requiring fixed total monthly payments. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold.

Calculate the investors expected before-tax internal rate of return on equity invested (BTIRR)? What does the number tell you?

Calculate the debt coverage ratio. What does the number mean?

Calculate the terminal capitalization rate? What does the number mean?

Calculate the NPV using a 14 percent discount rate. What does the number mean?