Question
You are considering purchasing an apartment for $1,400,000 which contains 30 one bedroom apartments and 10 two bedroom apartments. Land is estimated to be 18%
You are considering purchasing an apartment for $1,400,000 which contains 30 one bedroom apartments and 10 two bedroom apartments. Land is estimated to be 18% of the purchase price. The one bedroom apartments are expected to rent for $425 per month and the two bedroom apartments are expected to rent for $575 per month. You expect rents to increase by 6% per year. You project that your vacancy and collection losses will be about 4%. You expect that operating expenses will be 32% of the adjusted gross income. The Friendly Federal Savings Bank has agreed to lend to you at a 8.25% annual interest rate with an amortization period of 30 years paid monthly. The loan will have only a term of 10 years. The amount of the loan is going to be based upon a 1.3 Debt Service Coverage Ratio for the first year's NOI. The bank is going to charge three points. You expect to sell the property at the end of the fifth year. The sales price is expected to be based upon an 11.2% capitalization rate of the year six NOI. Sales expenses are projected at 6.5%.
Project Data
Investment Price
Building Value
Land Cost Allocation %
Land Value
Unit Type
# of Units
Monthly Ren
Annual Rent
1-BR
2-BR
Total Gross Income
Rental Increase %
Operating Expenses %
V&C %
Investor Cost of Cap. %
Owner's MTR %
Loan Information
Loan Interest Rate %
Loan Points Fee %
Debt Service Coverage Ratio
Amortization Period
Loan Term
Reversion
Capitalization Rate % for Reversion
Selling Expenses %
What is the loan amount and the annual Debt Service?
Loan Amount
Annual Debt Service
Monthly Debt Service
Prepare an amortization schedule for the first four years.
Year
1
2
3
4
5
ADS
Interest
Principal
EYR Bal.
How much Equity cash is needed to purchase property?
Cost
Less MTG
Plus PTS
Cash Req.
Project the annual cash flows for each of the first five years and the sixth year NOI
Year
1
2
3
4
5
6
GPI
Less V&C
Adj Gross
Less Exp.
NOI
Less ADS
BTCF
What is the cash flow from reversion?
Sale Price
Less S/E
A/R
Less Mtg
BTCF
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