Q1 If a lender requires a DCR of 1.20, a maximum LTV of 70 percent amortized over 25 years with an interest rate of 6 percent what is the maximum loan if the NOI is $100,000? What is the maximum property value?
Q2 NPV, IRR, Before and After Tax Cash Flows You are analyzing a commercial real estate investment that generates a net operating income of $5,000,000which increases by 3.5 percent per year. The purchase price is $58 million, the holding period is 10 years, the nominal income tax rate is 28 percent, the recapture tax rate is 25 percent and the long-term capital gain tax rate is 15 percent. A lender is willing to provide financing for the 10 year holding period with a 25 year amortization period for a fixed rate of 7 percent based on a loan to value ratio of 75 percent (25 percent equity). Calculate the before and after tax IRR and NPV based on a discount rate of 4% above the going in cap rate and a terminal cap rate of 1% over the going in cap rate. The cost of sale is three percent. Remember: going in cap rate-1st years noi /purchase price.
Q3Based on the following when will more principle than interest be paid. Loan Amount $100,000 Loan Term – 20 years monthly payments Loan Interest Rate – 4.5 percent Suppose the interest rate was 7 percent, when is the cross over?
Q4 You are analyzing a investment property with NOI of $125,000. If a lender is willing to make a loan at 6 percent, amortized for 25 years (assume annual payment) with an LTV of 70 percent and the equity requirement is 9 percent what is the overall rate (cap rate)? What is the value of the property?