Question

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A lender requires a 1.3 debt coverage ratio as a minimum. If thenet operating income...

A lender requires a 1.3 debt coverage ratio as a minimum. If the net operating income of a property is $88,400 what monthly amount of debt service would be acceptable?


a.

$114,900 or higher


b.

$5,667 or lower


c.

$101,500 or lower


d.

$114,900 or higher

Solutions

Expert Solution

Debt Coverage Ratio = Net Operating Income/Total Annual Debt Service

1.3 = $88,400/Total Annual Debt Service

Total Annual Debt Service = $68,000

So, Monthly Debt Service = Total Annual Debt Service/12

Monthly Debt Service = $68,000/12

Monthly Debt Service = $5,666.67

So, monthly amount of debt service would be acceptable is $5666.67 or lower

Option B

jeff jeffy answered 2 years ago
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