Referring to the example in Figure 13.2(a), suppose the market rent for a two-bedroom unit is $550 per month and for a three-bedroom unit is $650 per month. If the going cap rate is 10%, rework the pro forma calculations for the apartment project of Figure 13.2. Then determine the lender’s interest rate. What is the new breakeven vacancy factor?

Figure 13.2

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Market rent for subject property (unfurnished) 55 two-bedroom A, B, or C units-1167 sq ft @ 41.0 cents/sq ft = $478.47/mo or $480 55 20 three-bedroom A, B units-1555 sq ft @ 37.3 cents/sq ft = $580.00/ mo $580 x 20 $ Total estimated monthly income Other income: Coin laundry, vending machine x 12 = annual total Less vacancy factor of 5% (based on historical data) Adjusted gross annual income Less estimated expenses @ 29.45% Net income before debt service Requested loan value Loan/value ratio Long-term debt service @ 9.75% constant = $236,145.00 Debt service coverage ratio 1.3 Loan per unit Loan per square foot FIGURE 13.2(a) Pro forma for 75 apartment units = = $ = $32293.33 = $25.42 26,400.00 Capitalized value @ 9.5% = $3,229,789.00 $2,422,000.00 = 75% (high) governed by law 11,600.00 38,000.00 150.00 $ 38,150.00 457,800.00 -22,890.00 434,910.00 -128,080.00 $ 306,830.00 306,830.00 (0.095)