The subject is located in a market where lenders are making commercial loans on properties like...

The subject is located in a market where lenders are making commercial loans on properties like the subject at 7.5% per year with monthly payments and a 25-year amortization with a 80% loan-to-value ratio. The equity dividend rate in this market is 11%. What is the overall capitalization rate?

Expert Solution

Cap rate for the property is 16.96%. Assume that the installment is of $1 every month.

Based on this, we will calculate the loan amount. Loan amount/80% would be the property total value.

We will then calculate the net income by 11% equity + interest amount for year 1.

Refer calculation.

jeff jeffy answered 1 year ago

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The subject is located in a market where lenders are making commercial loans on properties like...

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