Question
In: Accounting
An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000...
An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000 Year 3 NOI $2,704,000 Year 4 NOI $2,812,000 You plan to purchase the asset at a 5% initial cap rate and to sell it 3 years later, also at a 5% cap rate. You plan to use a loan at 60% LTV to purchase the asset. The loan will be interest-only (no amortization) at a 4% annual interest rate. Answer the following:
What is the purchase price?
What is your initial equity investment?
What are the annual mortgage payments?
What is the loan balance at the end of year 3? (Please have process how could you get this number )
What is your expected equity (levered) IRR? ( Please have process how could you get this number)
Thank you !!
Solutions
ekkarill92 answered 2 years agoRelated Solutions
An apartment building has the following investment characteristics: Year 1 NOI $2,500,000
An apartment building has the following investment
characteristics:
Year 1
NOI
$2,500,000
Year 2
NOI
$2,600,000
Year 3
NOI
$2,704,000
Year 4
NOI
$2,812,000
You plan to purchase the asset at a 5% initial cap rate and to
sell it 3 years later, also at a 5% cap rate. You plan to use a
loan at 60% LTV to purchase the asset. The loan will be interest
only (no amortization) at a 4% annual interest rate....
2. An office building has the following investment characteristics: Year 1 NOI
2. An office building has the following investment
characteristics:
Year 1
NOI
$2,100,000
Year 2
NOI
$2,200,000
Year 3
NOI
$2,300,000
Year 4
NOI
$2,400,000
Initial (going in) cap
rate 7%
Loan Principal
$18,000,000
Interest
rate
5%
Amortization
30 years
Exit cap
rate
8%
Holding
period
3 years
Solve for each of the following:
Purchase
price
Loan...
An office building has the following investment characteristics: Year 1 NOI $2,100,000 Year 2 NOI $2,200,000...
An office building has the following investment characteristics:
Year 1 NOI $2,100,000 Year 2 NOI $2,200,000 Year 3 NOI $2,300,000
Year 4 NOI $2,400,000 Initial (going in) cap rate 7% Loan Principal
$18,000,000 Interest rate 5% Amortization 30 years Exit cap rate 8%
Holding period 3 years Solve for each of the following:
Purchase price
Loan to value ratio
Annual debt service
Debt service coverage ratio for year 1
Loan balance at the end of year 3
Equity (Levered) IRR
You are seeking financing for a $500,000 investment in an apartment building. The NOI in the...
You are seeking financing for a $500,000 investment in an
apartment building. The NOI in the first year is projected to be
$35,000. The bank is willing to underwrite a fully-amortizing, 30
year fixed rate mortgage with constant monthly payments at an
interest rate of 6%, compounded monthly.
Please note the following ratio:
Debt Coverage Ratio= Net Operating Income/ Annual Debt
Service
Compute the Debt Coverage Ratio if the bank underwrites a
mortgage at a Loan-to-Value Ratio of 75%.
A real estate broker is offering an apartment building for sale that has the following characteristics:...
A real estate broker is offering an apartment building for sale
that has the following characteristics:
The asking price is $3.5 million with the land valued at
$500,000.
The 160 apartment units rent for $250 per month with rent
expected to increase by 4% per year starting in year 2.
Vacancy and bad debt allowance is 6% of the potential gross
income each year.
Operating expenses are expected to be 32% of effective gross
income each year.
The real estate...
You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1...
You are considering the purchase of an apartment complex.
Purchase price: $775,000
BTCF:
Year NOI
1 $103,085
2 $108,361
3 $113,875
4 $119,636
5 $125,651
Holding period is four years
Cap rate is expected to be 7% in year 4
Selling expenses will be 5% of the sale price
The 4-year Treasury bill rate is 3% and your risk premium for
this project is 8%
a) Calculate the NPV of this project assuming that you do not
take any mortgages...
Suppose that you are considering an investment in an apartment building. The specifics are: - The...
Suppose that you are considering an investment in an apartment
building. The specifics are: - The building is four years old, has
a 85 percent occupancy rate, and has an expected useful life of 25
years. Assume that this occupancy rate is expected to continue for
the life of the building. - There are 130 2-bedroom units, 100
1-bedroom units, and 70 studios. - The 2-bedroom units rent for
$2800 per month, the 1-bedroom units for $2000 per month, and...
Suppose that you are considering an investment in an apartment building. The specifics are: - The...
Suppose that you are considering an investment in an apartment
building. The specifics are: - The building is five years old, has
a 80 percent occupancy rate, and has an expected useful life of 25
years. Assume that this occupancy rate is expected to continue for
the life of the building. - There are 90 2-bedroom units, 100
1-bedroom units, and 70 studios. - The 2-bedroom units rent for
$3000 per month, the 1-bedroom units for $2200 per month, and...
Suppose that you are considering an investment in an apartment building. The specifics are: &
Suppose that you are considering an investment in an apartment
building. The specifics
are:
- The building is four years old, has a 85 percent occupancy rate,
and has an expected useful life of 25 years. Assume that this
occupancy rate is expected to continue for the life of the
building.
- There are 130 2-bedroom units, 100 1-bedroom units, and 70
studios.
- The 2-bedroom units rent for $2800 per month, the 1-bedroom units
for $2000 per month,...
Suppose that you are considering an investment in an apartment building. The specifics are: &
Suppose that you are considering an investment in an apartment
building. The specifics
are:
- The building is four years old, has a 85 percent occupancy rate,
and has an expected useful life of 25 years. Assume that this
occupancy rate is expected to continue for the life of the
building.
- There are 130 2-bedroom units, 100 1-bedroom units, and 70
studios.
- The 2-bedroom units rent for $2800 per month, the 1-bedroom units
for $2000 per month,...
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