RE306_Discussion_Week_12_Spring_2009

RE306_Discussion_Week_12_Spring_2009 - Real Estate Process...

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1 Real Estate Process 306 Administrative Items Proforma with Debt Financing Other Topics IO Loans After Tax EIR
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2 Administrative Items Homework #3 – Due Friday, April 24 th at 5:00pm - uploaded to the course web site Quiz #3 week of April 27th Final – Sunday, May 10th
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3 Proforma with Debt Financing Overwhelming majority of properties are purchased with a loan of some sort; thus, we need to consider the effects of debt on cash flows
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4 Proforma with Debt Financing New Calculations in Proforma with Debt: 1. Interest Expenses: Determine Loan Payments, then use Amortization function on your calculator 2. Annual Debt Service : Determine monthly payments on your loan. Make sure your payment is “annualized”. This number should remain constant (just like depreciation). 3. Outstanding Mortgage Balance : Use Amortization function on your calculator after finding monthly payments on your loan. Determine the balance on the loan at the end of the holding period.
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5 Proforma with Debt Financing Your calculator can do all of this for you. ..... To find the above with the AMORT function on your calculator, set your calculator to 12 P/YR .
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6 Example We have a $393,750 loan, 30 years, 8% interest, monthly payments. How much interest will you pay in year 1? Principal? What is your ending balance after 1 year? Two years? Step 1 : Find Monthly debt service…. ( remember, find with 12 P/Yr ) N= 360 I/Yr= 8 PV=393,750 FV=0 PMT= -$2,889.20 per month Your Annual Annual Debt Service ( ADS ) is $2,889.20 *12= $34,670.38
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7 Example continued We have a $393,750 loan, 30 years, 8% interest, monthly payments. What is the interest & principal paid, and ending balance after 1 year? Two years? Step 2
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This note was uploaded on 04/23/2009 for the course RE 306 taught by Professor Sharonmccabe during the Spring '09 term at Wisconsin.

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RE306_Discussion_Week_12_Spring_2009 - Real Estate Process...

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