ANSWERS AND EXPLANATIONS TO ALL QUESTIONS ARE AT THE END OF THIS
DOCUMENT.
1)
If I expect the NOI in my first year to be $550,000, given the assumptions below, what is the maximum
loan amount a lender would give me?
•
1.20 DSCR
•
Market Cap rate of 7.8%
•
75% LTV
•
10 year term
•
25 year amortization
•
Interest rate of 7.0% (monthly compounding)
2)
A lender will give you a loan in an amount that produces a Housing Expense Ratio of 28%.
What is the
maximum the lender would be willing to give you based on the assumptions below:
•
Annual household income of $82,000
•
Monthly insurance is $52.00
•
Annual real estate taxes (property taxes) are $3,800
•
Interest rate of 5.5%
•
Amortization of 30 years
3)
Eight years ago, you took out a loan with a 15 year term to purchase a residential apartment building in
downtown Madison.
Assuming a 7.5% interest rate with amortization over 30 years and a monthly
payment of $3,496.07, calculate the balloon payment if you were to hold the loan until maturity.
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 Spring '12
 McCabe
 Depreciation, Interest, Taxation in the United States

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