Reference no: EM133029695
Question - Looking for correct answers with the supporting analysis. Built in 1972, this is a 24 unit apartment building in Dallas Texas. Each 2br 2ba unit rents for $1,000 per month. It is currently fully occupied. You have an opportunity to purchase it for $1,250,000. The NOI is $187,200. The financing terms offered by several banks in the area is the same: 5.25% simple annual interest only for 5 years payable in monthly installments. Each bank requires a 1.30 Debt Coverage Ratio to approve the loan.
1) What is the minimum down payment required to finance the purchase of this property?
2) What is the CAP rate on this property? What assumptions are you making in your cap rate calculation?
3) What is the annual and monthly interest payments? Based on the indicated annual NOI, are we running a negative or positive cash flow? By how much?
You are investing in a six unit residential property that was built in 1955. It is in good condition. You will be paying $750,000 for it and each unit is occupied and rents, at the market, for $1,000 per month. The land is worth $250,000. The local vacancy factor is 5%. The local property tax assessment rate is 1.25%. The total operating expenses for this property (including ALL expenses except debt service) is 35% of the projected gross income. You are borrowing $600,000 at a simple annual interest rate of 6% with $150,000 cash down payment.
a) What is the CAP rate? What assumptions are you making in your cap rate calculation?
b) What is the first year annual depreciation on the building?
c) What is the annual property tax, based upon the purchase price?
d) What is the cash on cash return on this investment?
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