lake land builders have secured a nine month construction loan amounting to $1\mathrm{.}5$ million for the development of a resort house on Lake Kegonsa, WI$.$ Following completion, the plan is to lease the property out as a vacation rental through Vrbo. The distribution schedule for the loan is as follows: $$200,000$ each month for months $1-6$ and $$100,000$ each months for months $7-9,$ with disbursements occuring at the end of each month. The loan carriers an annual fixed interest rate of $6\%,$ along with an upfront origination fee of $$7,500,$ which Lake Land Builders will pay in cash without financing it into the mortgage amount.

Assume that the loan will be repaid in full at the end of month $9.$

What will be the interest carry for this project?

What will the total loan amount that the developer must borrow $($Including interest carry$)?$

Calculate the lender's IRR $($effective cost to borrow$)$ on this construction loan

Answer rating: 100% (QA)

To calculate the interest carry for this project we need to determine the total interest paid over t... View the full answer