1. Calculate NOI for below T12 (Fairbanks, Alaska).
Loss to Lease: $10k
Controllable Expenses: $300k
Non Controllable Expenses: $175k
2. Using the same NOI and appropriate cap rate for this city, what is the value of the property (aprox.)? Show work.
3. Loan sizing using LTV methodology. A banker indicated that they can give you "70%" loan with a 5% interest rate and 25 year amortization. What is the amount you think you can get for the loan? Show work.
4. DSC Constrained Loan. A mortgage broke said they will give you a loan the lesser of "80%" or 1.25 DSCR constrained. The interest rate will be 5% and have a 30 year amortization. What is the amount of the loan you can get? Show work.
Solution for Question 1:
Given data for T12, Fairbanks, Alaska are
a) GPR (Gross Potential Rent) = $ 1 M = $ 1,000,000
b) Loss to Lease = $10 K = $10,000
c) Vacancy = $ 50 K = $ 50,000
d) Controllable Expenses = $ 300 K = $300,000
e) Non Controllable Expenses = $ 175 K = $175,000
To calculate Net Operating Income (NOI) we need to use the below formula :
NOI = GPR - (Loss to lease + Vacancy + Controllable Expenses + Non Controllable Expenses)
Plugging in the above given values into the formula, we get
NOI = $ 1,000,000 - (10,000 + 50,000 +300,000 +175,000)
= 1,000,000 - (535,000) // Adding all the items within bracket, namely controllable and non controllable expenses, losses and vacancy, the total is 535,000 //
= $ 465,000 // Subtract 535,000 from 1,000,000 to get 465,000 //
Answer: Net Operating Income (NOI) = $ 465,000
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