You are considering buying an apartment building and plan a renovation. You know the following:

200 units

$1,300,000 current NOI

$900 average rent per month

$360 average expense per unit per month

5% current vacancy rate

(a.)What is the projected NOI after the renovation and how much could you spend on the renovation?

Assume:

11% return requirement after the renovation

$1,200 rent per unit per month in better-managed, renovated properties.

5% market vacancy

8.75% cap rate for purchase

(b.) How much will you need to increase the current rents to justify a renovation?

Assume:

$10,000 per unit budgeted renovation costs

(c.) If you refinance the property after the renovation, how much can you borrow?

Assume the $1,200 per month rent scenario (a.) and:

8% interest rate

25 year amortization

9.26% Loan constant

1.3 Debt Service Coverage Ratio

(d.) What is the loan amount based on the following appraisal results?

Assume the $1,200 per month rent scenario and:

9% Cap rate

75% Loan to value ratio