The specifics of the opportunity are as follows: Assume 100% occupancy Property

Question

The specifics of the opportunity are as follows:

Assume 100% occupancy

Property purchase price $2,250,000. Loan to Value Ratio (LTV) 80%

Loan Terms: fully amortized over 30 years at 4.25% APR paid monthly

The property offers six recently updated “luxury” apartments. Each apartment has 3 bedrooms and 2.5 baths in 1,800 square feet of living space. Rents are $1,690 per month per apartment. All six units are leased but one of the units only receives half rent because the tenants in that unit are responsible for year round cosmetic maintenance of the walkways and greenspaces and also minor emergency repairs. You plan to invest an additional $150,000 in paid in capital for cosmetic updates on the property and closing fees. The tax rate on the property is 1.75% of the purchase price. For the sake of simplicity will assume that taxes and rents are constant.

3. Under the original loan conditions, how much do you have to pay extra each period to make the loan pay off in 20 years? What is the interest cost savings from doing that?

Instructions: Set up a spreadsheet for valuing this opportunity using Excel functions to answer the questions given

Explanation / Answer

CORRECTED SOLUTION:

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