Require a maximum ltv

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You are contemplating the purchase of a property for $5,000,000. Next year, the property NOI will be $400,000 and it is expected to grow by 3% each year. The lenders have indicated that they would be willing to finance the acquisition through a mortgage loan with a 5-year term, 20-year amortization and an interest rate of 7% but require a maximum LTV of 75% and a minimum DSCR of 1.25. Calculate the following:

a) The initial amount of the mortgage loan.

b) The property value at the end of 5 years if the cap rate decreases by a total of 1% during the five-year period

Reference no: EM132530978

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