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