What is the corresponding capitalization rate

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Reference no: EM13551567

Note: The information presented here applies to questions 1 through 5:

You are thinking about purchasing a small office building in Queens. The property contains 10,000 square fee of rentable space and is currently occupied by a single tenant with three years remaining on their lease. If the annual rent in the first year of your tenure as owner $30 per square foot and expenses are estimated to be 45% of effective gross income, what is the net operating income generated by the property in the first year of ownership?

Question 2

A lender offers to provide a mortgage to finance part of the acquisition of the property in the form of a 5-year interest-only loan with a 6.25% rate. What is the most the lender is willing to provide if they require a minimum debt coverage ratio equal to 1.2?

Question 3

The asking price for the property is $3,000,000 and the lender permits a maximum loan-to-value ratio of 70%, what is the most you can borrow by this criterion?

Question 4

If the lender requires both a minimum debt coverage ratio of 1.2 and a maximum LTV ratio of .70, what is the maximum amount you are qualified to borrow?

Question 5

If you decide to purchase the property for the asking price, what is the corresponding capitalization rate?

Reference no: EM13551567

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