3. The NOI for a small income property is expected to be $96,000 for the first...

  

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3. The NOI for a small income property is expected to be $96,000 for the first year. Financing will be based on a 1.2 DCR applied to the first year NOI, will have a 10 percent interest rate, and will be amortized over 20 years with monthly payments. The NOI will increase 3 percent per year after the first year. The investor expects to hold the property for five years. The resale price is estimated by applying a 7 percent terminal capitalization rate to the sixth-year NOI. Investors require a 12 percent rate of return on equity (equity yield rate) for this type of property. What is the present value of the equity interest in the property? 3. The NOI for a small income property is expected to be $96,000 for the first year. Financing will be based on a 1.2 DCR applied to the first year NOI, will have a 10 percent interest rate, and will be amortized over 20 years with monthly payments. The NOI will increase 3 percent per year after the first year. The investor expects to hold the property for five years. The resale price is estimated by applying a 7 percent terminal capitalization rate to the sixth-year NOI. Investors require a 12 percent rate of return on equity (equity yield rate) for this type of property. What is the present value of the equity interest in the property?

Answer rating: 100% (QA)

To find the present value of the equity interest in the property we need to calculate the following components 1 Loan Amount 2 Annual Loan Payment 3 Equity Cash Flow for Years 15 4 Terminal Value of t... View the full answer