Question
You are considering the purchase of an office building for $4,000,000. You anticipate $750,000 first-year gross potential income; vacancy and collection loss equal to 10%
You are considering the purchase of an office building for $4,000,000. You anticipate $750,000 first-year gross potential income; vacancy and collection loss equal to 10% of gross potential income; miscellaneous income equal to 2% of PGI; operating expenses equal to 40% of effective gross income; and capital expenditures equal to 5% of EGI.You have arranged a mortgage loan of $2,800,000 with an annual interest rate of 6%. The loan will be amortized over 20 years with a monthly payment of $20,060. Total upfront financing cost will equal 2% of the loan amount.Fill out the cash-flow analysis below and answer/calculate the following questions. ItemAmount________Potential Gross Income (PGI):$_____________Less Vacancy and Collection Loss (VC):______________Miscellaneous Income:______________= Effective Gross Income (EGI):______________Less Operating Expenses (OE):______________Less Capital Expenditures (CAPX):______________= Net Operating Income (NOI):______________Less Debt Service (DS):______________ = Before-Tax Cash Flow (BTCF):$_____________ 1) What is the Net Operating Income (NOI)? 2) What is the CAP Rate? 3) Calculate the Effective Gross Income Multiplier (EGIM): 4) What is the required equity investment? 5) Calculate the Equity Dividend Rate (EDR): 6) Calculate the Net Income Multiplier (NIM): 7) Calculate the Operating Expense Ratio (OER): 8) Calculate the Debt Coverage Ratio (DCR): 9) Calculate the Debt Yield Ratio (DYR): 10) Calculate the Loan-to-Value Ratio (LTV):
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