Cash Flow Analysis [2903]

An apartment complex has 100 efficiencies that rent for $600 per month, 200 2-bedroom units that rent for $900 each, and 50 3-bedroom units that rent for $1,100 each. Market research indicates that a 7% vacancy allowance and a 3% collection allowance are reasonable. Other income from vending machines and laundry facilities is about $4,000 per month. Operating expenses are about 35% of effective gross income.

The property recently sold for $15,000,000. The mortgage was 70% LTV, 8% interest for 15 years. Calculate the NOI, Equity Dividend Rate, Capitalization Rate using the Band of Investment method, and the Debt Coverage Ratio.

Units	Rent/month	Rent/year	Total
100	$600	$7,200	$720,000
200	$900	$10,800	$2,160,000
50	$1,100	$13,200	$660,000
Potential Gross Income			$3,540,000
Less: Allowances		10%	$354,000
Other income			$48,000
Effective Gross Income			$3,234,000
Less: Operating Expenses		35%	$1,131,900
Net Operating Income			$2,102,100
Less: Debt Service			$1,226,710
Equity Dividend			$875,390
Equity Dividend Rate			19.5%
Debt Coverage Ratio			1.7

Sale Price			$15,000,000
Mortgage Position			70%
Equity Position			30%
Mortgage Amount			$10,500,000
Equity Amount			$4,500,000
Mortgage Rate			8.0%
Mortgage Term			15
Mortgage Constant			0.116830
Cap Rate			14.0%
Cap Rate using band of investment method			14.0%
EGI Multiplier			4.6
Gross income Multiplier			4.2