| Q3 Name Date |
| Assumptions |
| Total acquisition price: | 1,000,000 | | Expected holding period(years) | | | 5 |
| Contract rents: | | | Exit cap rate for selling |
| Number of suites | Monthly rent | | in year 5 | | | 8% | NOI6 |
| 5 | 2,000 | | Selling expenses in year 5: | | | 60,000 |
| 5 | 1,500 | | First mortgage loan(LTV): | | | | 80% |
| Annual market rent increases: | 2% | | Annual mortgage interest rate: | | | 8% |
| Vacancy and collection losses: | 5% | | Loan amortization period: | | | 30 | years |
| Operating expenses: | 35% | of EGI | Total up-front financing costs: | | | 5% |
| Capital expenditures: | 10% | of EGI |
| 1. Equity Investment |
| Total acquisition Price |
| Mortgage |
| - Up-front financing cost |
| Net Mortgage proceeds |
| Initial Equity Investment |
| 2. Operation | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| PGI Potential Gross Income |
| - V&C Vacancy & Collection Losses |
| = EGI Effective Gross Income |
| - OE Operating Expenses |
| - CAPEX Capital Expenditures |
| = NOI Net Operating Income |
| - DS Debt Service |
| BTCF Before Tax Cash Flow |
| 3. Sale |
| SP Sale Price |
| - SE Selling Expenses |
| = NSP Net Sales Proceeds |
| - LB Loan Balance |
| = BTER Before Tax Equity Reversion |
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| 4. Total Cash Flow |
| NPV @ |
| 15% |
| 6. IRR |
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Quiz3.xlsx
