Question

A lender is giving lending based on income that a property can create.  Given the following conditions,...

  1. A lender is giving lending based on income that a property can create.  Given the following conditions, what is the maximum loan amount that you will be offered?

150,000 SF building that is 70% leased at $18/SF, but $5/SF in operating expenses.  Loan would be at 5% with a 25-year amortization and require a 1.25x debt service coverage ratio.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Assuming that the building will continue to be 70% leased out

Profit per SF = $18 - $5 = $13 per square feet

Profit for the building per year = 150000 square feet * $13 per square feet * 70% = $1365000

Allowed payment per year = 1365000/1.25 = $1092000

So, assuming the loan at 5% with annual payments of maximum $1092000

Loan = present value of payments

=1092000/0.05*(1-1/1.05^25)

=$15,390,587.47

Maximum Loan amount that will be offered is $15,390,587.47

  

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
As a lender contemplating a non-recourse loan to an income-producing property, which of the following would...
As a lender contemplating a non-recourse loan to an income-producing property, which of the following would be most important in your financial analysis? a. Terminal cap rate b. Net worth of borrower c. Number of years used in DCF projection d. Debt coverage ratio
Given the following information, calculate the maximum allowable annual loan payment: Minimum Debt Coverage Ratio: 1.35...
Given the following information, calculate the maximum allowable annual loan payment: Minimum Debt Coverage Ratio: 1.35 Maximum Loan to Value: None Property Value: $1,000,000 Net Operating Income: $100,000 Operating Expenses: $60,000
Please answer all. In general, the interest appraised of an Owner-Occupied property is: Leased Fee Fee...
Please answer all. In general, the interest appraised of an Owner-Occupied property is: Leased Fee Fee Simple Equity Return None of the above In general, the interest appraised of an Investment property is: Leased Fee Fee Simple Equity Return None of the above In general, the interest appraised of Land is: Leased Fee Fee Simple Equity Return None of the above The CAP Rate is a weighted average of: ROA and LTV Mortgage Constant and LTV Mortgage Constant and ROE...
First, you could build an office building on the site. You’ve spoken with a broker who...
First, you could build an office building on the site. You’ve spoken with a broker who tells you that you can expect to earn around $60 /sf/year on new office space in the market. The site is currently zoned for residential, but the city has granted variances to nearby parcels allowing for office development. You’re optimistic that the city will grant you a similar variance allowing a 25,000 sf office building on your lot. You’ve spoken to a banker who...
You are considering an investment into an income producing property (let’s call it Property A). The...
You are considering an investment into an income producing property (let’s call it Property A). The acquisition price is $227,500 and you can finance it with a 70% loan to value ratio mortgage with a 6% annual interest rate. This will be a fixed-rate mortgage with constant monthly The broker provides you with the following (incomplete) information about Property A. You determine that you will make this investment if it yields an after-tax internal rate of return on equity which...
For this assignment, you will create a BPMN diagram to depict the business process to get...
For this assignment, you will create a BPMN diagram to depict the business process to get a home mortgage based on the following narrative. You can use either DrawIO or BizAgi to create the process drawing. For this process, you can assume that the loan is a refinance not a home purchase. There are some small differences in the process to refinance an existing mortgage than to get a new mortgage. In the following narrative, I'm explaining all of the...
Given the following information regarding an income producing property, determine the internal rate of return (IRR)...
Given the following information regarding an income producing property, determine the internal rate of return (IRR) using unlevered cash flows. Expected Holding Period: 5 years; 1st year Expected PGI: $95,000; 2nd year Expected PGI: $95,000; 3rd year Expected PGI: $95,000; 4th year Expected PGI: $95,000; 5th year Expected PGI: $95,000; Vacancy at 5% annually. Operating Expenses 40% of EGI annually. Debt Service in each of the next five years: $20,000; Current Market Value: $897,000; Required equity investment: $200,000; Gross Sales...
Given the following information regarding an income producing property, determine the internal rate of return (IRR)...
Given the following information regarding an income producing property, determine the internal rate of return (IRR) using levered cash flows. Expected Holding Period: 5 years; 1st year Expected PGI: $91,000; 2nd year Expected PGI: $91,000; 3rd year Expected PGI: $91,000; 4th year Expected PGI: $91,000; 5th year Expected PGI: $91,000; Vacancy 3% annually; Other Income $10,000 annually; Operating Expenses 40% of EGI annually. Debt Service in each of the next five years: $30,000; Purchase Price: $875,000; Required equity investment: $225,000;...
Part II: True/False (2% each) T                F                Negative amortization reduces the principal b
Part II: True/False (2% each) T                F                Negative amortization reduces the principal balance of the loan. T                F                ARMs help lenders limit or eliminate interest rate risk. T                F                The default risk of a fixed rate mortgage is higher than the default risk of an ARM. T                F                The term “percentage rent” refers to rent paid by the tenant as a percentage of the space leased to reimburse the landlord for increases in operating expenses. T    ...
You are considering the purchase of a small office building. The office building specializes in offering...
You are considering the purchase of a small office building. The office building specializes in offering facilities to small startup firms who are looking to avoid long-term commitments while their businesses are growing. Tenants sign one-year leases and may renew at market rates, if they so desire. The building is configured with 25 suites. Five (5) suites each have 4,000 useable square feet and ten (10) each have 2,500 usable square feet. The remaining ten (10) suites each have 1,000...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT