real estate analysis finance

timer Asked: Nov 7th, 2016

Question description

You are considering the purchase of a quadruplex apartment for $200,000. Each of the four units is expected to rent for $800 per month. Expected vacancy allowance is 12.5%, and operating expenses are expected to be 40% of effective gross income.

a)  What is the expected NOI and cap rate for this property?

b)  Suppose Biggie Bank will lend you $140,000 to purchase this property. The loanwill have a 30-year term, monthly payments, and an 8% interest rate.

  i.  What is the annual debt service required on this loan?If this loan is repayed after three years what will be the outstanding balance?

  ii.  What is the equity dividend rate on this property?

  iii.  What is the debt coverage ratio?

What is the breakeven ratio? 

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