If the cap rate on a property is 12% and loans are available at an 11% mortgage
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If the cap rate on a property is 12% and loans are available at an 11% mortgage constant then what is the expected income component on the before-tax return (i.e., cash-on-cash return) if the investor borrows 80% of the property price? The mortgage constant is the “mortgage capitalization rate” and defined as the annual amount of debt service to the total value of the loan such as $1,000 payment per month on $200,000 is a mortgage constant of $12,000 / $200,000 = 6%.
What about LR of 2?
Expert Answer:
Answer rating: 100% (QA)
The expected beforetax return cashoncash return on the property would be 12 11 x 80 11 128 The mortg... View the full answer
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