Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Core Concepts of Accounting

Authors: Cecily A. Raiborn

2nd edition

470499478, 978-0470499474

More Books

Students also viewed these Finance questions

Question

explain five important changes in the world of work;

Answered: 1 week ago

Question

What is meant by organisational theory ?

Answered: 1 week ago

Question

What is meant by decentralisation of authority ?

Answered: 1 week ago

Question

Briefly explain the qualities of an able supervisor

Answered: 1 week ago

Question

Define policy making?

Answered: 1 week ago

Question

Define co-ordination?

Answered: 1 week ago

Question

Mortality rate

Answered: 1 week ago

Question

Armed conflicts.

Answered: 1 week ago