RL-EST 321 In class practice problem on NPV and IRR YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 Gross Potential Rent (GPR) - Loss to lease - Loss to vacancy & collection Loss Net Rent Revenue (NRR) + Miscellaneous Income + Expense Reimbursements Effective Gross Income (EGI) - Operating expenses Net Operating Income (NOI) - Annual debt service (ADS) -Capital expenditures Before Tax Cash Flow (BTCF) 420,404 400,000 263,066 20,000 116,934 404,000 263,066 20,200 120,734 408,040 263,066 20,402 124,572 412,120 263,066 20,606 128,449 416,242 263,066 20,812 132,364 Debt service coverage ratio 1.52 1.54 1.55 1.57 1.58 Given: Building Cost: 5,000,000 Bank Loan: LTV Interest rate Amortization Balloon payment Loan amount Monthly payments Annual payments 4 0 (1,250,000) 1 116,934 2 120,734 3 124,572 128,449 132,364 75.00% 5.00% 25 Yrs 15 Yrs 3,750,000 21,922.13 263,065.56 5 1,831,583 1,963,947 LNPV TIRR 356,866 16.57% Equity in project Capital expenditures Going in cap rate Going out cap rate Discount rate NOI grows per year Sales commission 1,250,000 5.00% of NI 8.00% 7.75% 10.00% 1.00% 5.00% Sale in year 5 = 420,404/.0775 = Minus sales commission @5% Minus loan balance (end of year 5) Residual 5,424,568 271,228 3,321,757 1,831,583 RL-EST 321 In class practice problem on NPV and IRR YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 Gross Potential Rent (GPR) - Loss to lease - Loss to vacancy & collection Loss Net Rent Revenue (NRR) + Miscellaneous Income + Expense Reimbursements Effective Gross Income (EGI) - Operating expenses Net Operating Income (NOI) - Annual debt service (ADS) -Capital expenditures Before Tax Cash Flow (BTCF) 420,404 400,000 263,066 20,000 116,934 404,000 263,066 20,200 120,734 408,040 263,066 20,402 124,572 412,120 263,066 20,606 128,449 416,242 263,066 20,812 132,364 Debt service coverage ratio 1.52 1.54 1.55 1.57 1.58 Given: Building Cost: 5,000,000 Bank Loan: LTV Interest rate Amortization Balloon payment Loan amount Monthly payments Annual payments 4 0 (1,250,000) 1 116,934 2 120,734 3 124,572 128,449 132,364 75.00% 5.00% 25 Yrs 15 Yrs 3,750,000 21,922.13 263,065.56 5 1,831,583 1,963,947 LNPV TIRR 356,866 16.57% Equity in project Capital expenditures Going in cap rate Going out cap rate Discount rate NOI grows per year Sales commission 1,250,000 5.00% of NI 8.00% 7.75% 10.00% 1.00% 5.00% Sale in year 5 = 420,404/.0775 = Minus sales commission @5% Minus loan balance (end of year 5) Residual 5,424,568 271,228 3,321,757 1,831,583