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Part 1 Income Approach

Q1

Given the following information, calculate the overall capitalization rate:

Sale price: $3,250,000;

Potential gross income: $255,000;

Vacancy and collection losses: $20,500;

and Operating expenses: $35,000.

Q2

Given the following information, calculate the net operating income assuming below-line treatment of capital expenditures:

Property: 10 office units,

Contract rents per unit: $2,500 per month;

Vacancy and collection losses: 10%;

Operating expenses: $52,000;

Capital expenditures: 15%.

Part 2 NPV & IRR

Given the following information provide an analysis that answers the questions at the end of the assignment.

Purchase Price: $4,250,000

Rents:

Tenant	Unit 1	Unit 2	Unit 3	Unit 4	Unit 5	Unit 6	Unit 7	Unit 8
Monthly Rent	$5,400	$5,400	$6,200	$3,500	$3,600	$3,300	$3,700	$3,100

Year 1 NOI: $248,678

NOI Growth Rate: 2.6%

Loan:

LTV: 75%

Amortization Period: 25 years, Term: 10 years

Interest Rate: 3.35%

Lender Points: 2%

Selling Costs: 3%

Going Out Cap Rate: 5.5%

Discount Rate: 10%

Questions:

Answers to be Levered only.

1. What is the going in cap rate?
2. What is year 1 PGI?
3. What is the DSCR?
4. What is your Initial Investment?
5. What is the sale price after the five-year hold?
6. What is the loan balance at sale?
7. What is the NPV for this project?
8. What is the IRR for this project?
9. What is the DCF for this project?
10. What is the reversion amount?

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