Question
You are considering an investment in a small medical office building in Hackensack, NJ. The asking price for the building is $3.5M and a local
You are considering an investment in a small medical office building in Hackensack, NJ. The asking price for the building is $3.5M and a local commercial bank has offered to provide financing in the form of a 5-year mortgage with a 30-year amortization period. The interest rate on the mortgage is 6% and payments are made on an annual basis. The lender requires that the debt-coverage-ratio (DCR) for the loan be at least 1.25.
If you estimate NOI in your first year of ownership to be $200,000, what is the largest amount you can borrow based on the constraint imposed by the DCR?
What is the corresponding loan-to-value (LTV) ratio?
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South-Western Federal Taxation 2018 Comprehensive
Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young
41st Edition
1337386006, 978-1337386005
