Question

In: Finance

The purchase price is $2,000,000 There are 30 units and the market rent is $850/month Market...

The purchase price is $2,000,000

There are 30 units and the market rent is $850/month

Market rents are expected to increase 4% per year

Vacancy and collection loss is 10%

Real Estate Taxes are expected to be $20,000 in year 1 and increase 5% per year

Insurance is expected to be $10,000 in year 1 and increase 7% per year

Utilities are expected to be 9% of EGI each year

Repairs and Maintenance costs are expected to be 7% of EGI each year

Grounds and Security costs are expected to by 6% of EGI each year

The market value of the investment is expected to increase 6% each year

Selling expenses will be 5%

The holding period is 5 years

80% of the purchase price can be borrowed on a 30-year, monthly payment mortgage

The annual interest rate on the loan will be 8%.

Loan origination fees will be 1% of the loan amount (paid in the year the loan is taken out - Year 0)

There are no prepayment penalties if you pay the loan early.

Tenant Improvements are expected to be $3,000/year

Leasing Commissions are expected to be $1,000/year

A roof repair totaling $15,000 will be completed in year 3

The required rate of return for the investor is 12%.  

Assume taxes are 30% of BTCF.

Assignment:

Fill out the income statement.

PGI (Potential Gross Income)
-VC (Vacancy/Collection Loss)
EGI (Effective Gross Income)
　 OE (Ope. Expenses)
　 Real Estate Tax
　 Insurance
　 Utilities
　 Repair & Maint
　 Grounds & Security
-OE (Total Ope. Expenses)
NOI (Net Operating Income)
　 DS (Debt Service)
　 Interest Payments
　 Principal Payments
-DS (Total Debt Service)
　 CAPX (Capital Exp.)
　 Tenant Improvements
　 Leasing Commissions
　 Roof Repair
-CAPX (Total Cap Exp.)
BTCF (Before Tax Cash Flow)
-TAX
ATCF (After Tax Cash Flow)

Calculate the monthly mortgage payment to find debt service.

What is the IRR and NPV of the property? (CF0 = equity investment + loan origination fees)

Calculate the ratios for one or five years as indicated on the worksheet

To find the mortgage balance, principal and interest payments:

Enter key strokes to find payment on the loan

Solutions

Expert Solution

jeff jeffy answered 3 days ago
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