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Property Information:

Located at 439/441 Lowes – Properties are now vacant.

Max Building Size, not including porch(es), 40 feet by 52 feet (can’t use exactly 40 x 52)

University has offered $100,000 total, for both lots (use as market value of the lots).

Financing Options - All loans have $3,000 in additional closing costs, in addition to lender’s points and maximum LTV of 75%. (Use 75% LTV for all calculations)

1)  25 Year loan - 1 Year Arm tied to the 10 year U.S. Treasury bond. Rate calculated as Bond rate + 1.0%.  Current Treasury rate = 2.1% (current rate is 3.1%, which is 2.1 + 1.0.  Caps of 2/10.  Bank fees: 2.0 points

2)  25 year fixed rate currently 4.2%.  Bank fees: 1.0 point

3)  10 Year Interest Only loan at 3.00%.  Bank fees: 2.1 points

Part 1

Requirements:

1) Sketch of floor plan – Use floorplanner.com or similar quality sketch program to sketch the layout of your proposed building.  You can design a single large house or a duplex.  If you are designing a duplex you only need to sketch out one side.  Include interior walls and furniture (even if you are renting your property unfurnished).

2) Perform Cost Approach – Use the square footage of the property, based on your layout sketch.  Go to building-cost.net to use the calculator.  Print out and turn in the printout from building-cost.net.  Be sure to keep a record of your building cost to use for part 3.

3) Print off and turn in a copy of the Plat Map – Go to the Montgomery County Auditor’s website (www.mcauditor.org) and locate and print off a “plat Map” for the subject lots.

4) Create Rent Strategy – Determine your rent strategy, including number of students, cost per semester, what utilities are included in the rent and if you are going to rent it in the summer.  Write up a summary of your strategy.

Part 2

IMPORTANT: Use a 5 year holding period for all calculations.

Requirements:

1) Lender’s Yield and Borrowers Cost for all 3 loan options –

2) Year 1 NOI

3) Un-Levered NPV and IRR

4) Levered NPV and IRR

5) Choice of Financing recommendation and Justification