You have an opportunity to purchase a 5-story multifamily building which is presently vacant. The asking price is $500,000. After discussing the project with your architect and general contractor, you believe you can reconfigure the building to accommodate 5 residential apartments, comprised of three, 1-BRs and two, 2-BRs. The hard costs to complete the renovations total $200,000, inclusive of $15,000 in contractor profit. Closing Costs are estimated at $35,000. Rent for the 1-BRs will be $2,000 per month while the 2-BR will rent for $2,500. A vacancy rate of 3.00% appears reasonable.

Operating Expenses are comprised of $12,000 in RE Taxes, $2,500 in Fuel, $2,000 in Electricity, $1,500 in Water/Sewer Charges, $3,000 in Insurance, $1,500 in Accounting, $5,000 in Repairs & Maintenance and 7.00% of EGI in Management Fees. You estimate a cap rate of 7.00% upon completion and stabilization. SouthBank will provide a $450,000 bridge loan for renovations with a term of 12-months, interest- only at a rate of 8.00% and will charge 1.00% as an Upfront Fee, which is to be paid at the time of closing. Assume Interest for the 12-month term is $36,000 and will be funded from proceeds of the bridge loan. During renovation, no Carrying Costs will be incurred for water, accounting, repairs, or management as the project will be vacant.

You are estimating a renovation period of 12 months if you engage the General Contractor and 6 months if you complete the renovations on your own (no GC). You have $250,000 in cash equity saved for this investment and all of it will be funded at the time of closing.

1. Prepare an estimate of Total Project Costs for the 6-month and 12-month periods.

2. Calculate the Required Equity needed to complete the project for the 6-month and 12- month periods.

3. Upon completion and stabilization, you want to refinance the $450,000 and monetize equity. If a lender is willing to provide a permanent loan at an 80% LTV, a 4.50% fixed interest rate, a 30-year amortization schedule, and a minimum DSCR of 1.20x, how much cash can you monetize from the refinance?