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Is this project feasible according to the required rent

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Reference no: EM133107366

Question - Use the information provided below to answer the question that follows:

Project Type:

Apartment Building

Number of Units:

60

Expected Rent Per Unit Per Month:

$2,000

Site Acquisition Costs:

8 acres @ $500,000 per acre

Site Development Costs:

8 acres @ $100,000 per acre

Hard Construction Costs:

$130,000 per unit

Soft Construction Costs:

$25,000 per unit

Vacancy Rate:

5%

Operating Expense Ratio:

40%

 

 

Debt Service Coverage Ratio:

1.25

Interest Rate:

5% per year

Amortization Period:

30 years

Cap Rate for Apartment Buildings:

6%

Required Return to Equity:

8%

Required - Is this project feasible according to the required rent approach?

Reference no: EM133107366

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