| Homework Assignment 3 | | Name (s): |
| Answer Sheet | Acquisition | | Operations | | Disposition |
| | Purchase Price | | Vacancy & Credit Loss | | Exit Cap Rate | | | | | | | | | | |
| | Maximum LTV | | Rental Growth Rate | | Sales Commission | | | | | | | | | | |
| Suggested
Solution | Required DCR | | Fixed Expense Growth Rate | | Other Sale Costs |
| | Interest Rate | | Other Expense Growth Rate | | Discount Rate | | | | | | | | | | |
| | Amortization Term | | CapX/Reserves |
| | Origination Fee | | | | | | | | | | | | | | |
| | Other Acquisition Costs |
| | | | | | | | | | | | | | | | |
| Year | Acquisition | 1 | 2 | 3 | 4 | 5 | 6 |
| Gross Scheduled Income | | | | | | | | | Annual Operating Expenses - Year 1 | | | | | | |
| Vacancy & Credit Loss | | | | | | | | | Fixed Operating Expenses | Insurance: | $4,700 |
| Gross Operating Income | | | | | | | | | | Property Taxes | $35,500 |
| Fixed Operating Expenses | | | | | | | | | | Management |
| Other Operating Expenses | | | | | | | | | Other Operating Expenses | Water & Sewer: | $8,000 |
| Reserves for Replacement | | | | | | | | | | Gas: | $6,900 |
| Total Operating Expenses | | | | | | | | | | Landscaper: | $3,600 |
| Net Operating Income | | | | | | | | | | Pool Service: | $2,800 |
| Annual Debt Service 1st | | | | | | | | | | Trash: | $2,880 |
| Cash Flows Before Taxes | | | | | | | | | | Assistant Manager: | $4,800 |
| Purchase Price | | | | Loan Amount Using LTV | Loan Amount Using DCR | | | | | Laundry: | $600 |
| Plus: Other Acquisition Costs | | | | | | | | | | Repairs: | $4,800 |
| Plus: Loan Origination | | | | | | | | | | Maintenance: | $4,000 |
| Less: Balance of 1st Mortgage | | | | | | | | | | Supplies | $1,200 |
| Required Equity | | | | | | | | | | Reserves/CapX | $1,600 |
| Year of Sale | 5 | | | | | EOY 5 |
| Sale Price |
| Less: Commissions |
| Less: Other Closing Costs |
| Less: Loan Balance 1st |
| Net Sale Proceeds |
| Equity Cash Flows |
| Leveraged IRR |
| Unlevered Cash Flows (Note 1) |
| Unlevered IRR |
| Note 1: | Does not include financing. No loan points, no debt service, no loan balances. |
| PV of Cash Flows |
| Less: Initial Investment |
| Net Present Value (NPV) |
| | | | | | | | | 0.0548913271 |
| Offer Price to Get 14% IRR | | | | | | | | .` |
| Homework Assignment 3 | Name (s): |
| Answers |
| First Mortgage Amount |
| Total Equity Cash Required at the Time of Purchase |
| Calculate the following ratio using your reconstructed pro forma operating data for year 1. |
| What is the “going in” cap rate (disregard acquisition closing costs) |
| What is the Gross Income Multiplier? (use gross schedule income) |
| (use gross schedule income) |
| Operating Expense Ratio |
| Equity Dividend Rate Year 1 = Cash on Cash (Use Total Initial Equity Investment) |
| Debt Coverage Ratio Year 1 |
| Effective Cost to Borrower for 5 Years |
| What are your estimated market rents? Include 2 sources for your estimates. Write a brief analysis of your comparable rental income. Explain why some comparables are superior or inferior. Metrics can include size, location, condition of the property, parking and other amenities. Remember that rent is only collected on 95% of the gross building area. |
| Unit Description | Gross Building Area | Net Rentable Area | Market Rent |
| Gross Building Area | 26,249 |
| Total Monthly Rent |
| Total Gross Schedule Rental Income |
| Summary of your market rents and Analysis |
| What is the impact on the investment if you use market rents? |
aliajhiem
homework_3_answer_sheet-2.xlsx
