Question

You are interested in purchasing a commercial property. You project that the property’s NOI nextyear will be $1,200,000. The current cap rate for similar properties is 8%. You are interested in acquiring a loan with a 30-year amortization term at a 6% annual interest rate. Based on the two metrics provided below calculate the loan amount. You must show all your calculations to receive full credit.

14. Given the following information calculate the property’s NOI [8 points] and BTCF [7 points]. You must show all your calculations to receive full credit.

Number of units = 20
Monthly rent per unit = $1,300
Vacancy rate = 7.5 percent
Depreciation = $50,000 per year
Annual operating expenses = $161,800
Annual Miscellaneous Income = $35,000
Annual Capital Expenditures = $32,000
Loan Amount = $2,000,000
Loan Terms = 30-year fully amortizing with monthly payments Loan Interest Rate = 5.0%
Taxes Paid = $50,000

Answer 1

The loan amount is $15,000,000

NOI is $161,800

BTCF is $963

Workings: