uestion 1 You are buying a property and are considering taki

uestion 1 You are buying a property and are considering taking out a 7% loan amortizing at a 30-year rate with monthly payments. Your first evaluation of the property indicates that it will have an NOl of $1,000,000 per year. What is the maximum conceivable amount that might be loaned on the property, given this basic information on the available cash flow to repay the loan?

Solution

Annual NOI $1,000,000.00 Monthly NOI $83,333.33 Assuming the entire montly NOI is used to service the debt repayment obligations PMT $83,333.33 NPER 360 (30 X 12) RATE 0.5833% 7%/12 Total Loan Value $12,525,630.66 -PV(0.5833%,360,83333.33,,) Maximum loan value is thus $12,525,630.66