Question: A developer is planning a 20-unit apartment building that has an estimated total cost of $5,000,000, which includes the land. After the project is completed

  1. A developer is planning a 20-unit apartment building that has an estimated total cost of $5,000,000, which includes the land. After the project is completed and leased up (stabilized) it is expected to have pro forma NOI of $300,000. Market cap rates are at 5%. They have talked to local banks and it looks like current underwriting guidelines are as
    follows:
    • Loan to Value 60%
  2. • Loan to Cost 70%
    • DCR 1.20
    • Underwriting interest rate 6%
    • Underwriting Amortization 30 years

  4. Required
  5. What loan amount should the developer use in their pro forma?

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