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Calculate rent efficiently with reimbursement CAM

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Student guide Show your work to any problem, even if it’s just a pencil mark on paper. If it’s simple math, show how to set up the formula/problem. No works, max credit 1/2. Answer in your own words. Do not copy answers from books…or answer sheets. If yes, up to 1/2 credit. If I ask you to show the formula, I am referring to Excel. e., PMT (n, i, PV, FV). You can also use the financial calculator notation you use. question What is the impact of depreciation on net profit in the operating years and after the sale? What are the 4 warranties found in the General Warranty Deed? What is default? Which of the following two ARMs is likely to be more expensive, i.e. offered with a higher initial interest rate? ARM A has a 3% margin and is linked to a three-year index with biennial adjustable payments; payments must not increase by more than 10% compared to the previous period; The time limit is 30 years and no guessing or scoring is allowed. ARM B has a 3% margin and is linked to a one-year index with payouts to be adjusted each year; payments must not increase by more than 10% compared to the previous period; the term is 30 years and no assumptions or points are allowed. What provision in the note would prevent a lender from directly asking a borrower for repayment, with certain exceptions? List the 4 basic components of any component problem. Explain the difference between real interest rate and nominal interest rate. What are the 3 main approaches to assessment? Explain (simple) how to calculate each one? All things being equal, if similar properties are being sold but one has a cap rate of 5% and the other has a cap rate of 8%, what can that say about those properties? According to Dan, what are 3 of the 4 approaches that lenders typically take to determining loan amounts? Explain why lenders use the retention formula to calculate prepayment penalties? How is yield maintenance different from announced or staggered prepayment penalties? What do you think are the 5 most important elements of due diligence and why? How can standard deviation be used to assess the risk of one investment opportunity versus another? What are the four phases of the real estate cycle? What impact can a tenant’s credit quality have on a building’s value? What does “subscribe” mean? What are the 4 factors to consider? Problems Garret just completed a new loan for his 4-unit apartment as follows: initial loan amount, $1,000,000, interest rate 4%, tenor of 10 years, amortization over 30 years and loan fee 2 %. What is the monthly payment? What will be the outstanding balance when the loan matures? What is the result at the end of year 5? What is the real interest rate if Garret holds the bond until maturity? And if he gives it back at the end of 5th grade? What is the total interest payable if the loan is held to maturity? Ambrose buys a property for $100,000 and can borrow 80% at 8% interest and monthly payments. The loan must be repaid over 25 years. Alternatively, he can get a 90% loan at 8.5% interest for the same loan term. Ambrose plans to own the property for the entire term of the loan. What is the additional cost of borrowing additional funds? (Hint: The loan amount does not affect the answer.) How would your answer change if 2 points were charged for a 90% loan? Would your answer to part (b) change if the borrower intends to own the property for only 5 years? Stephy inherited a fortune from her grandmother. Her CPA wants to know the PV of what she inherited. She will receive $5,000 at the end of each year for the next 5 years. The ACP recommends using a discount rate of 5%. What is PV? If Stephy deposited every payment in the bank and received 3% interest, compounded annually, how much money would she have in 5 years? Chenxi has a small shopping mall. She has 1,000 square feet of rental space and has received two offers: Tenants from 1 to 5 years, initial basic rent is $25 psf, 2.5% per year increment. 2-5 year tenant, initial base rent $26 psf, 3% annual increment, but requires 3 months of free initial rent. Both tenants will pay an additional 10 psf on the CAM return, a 2.5% annual increase. Operating costs for year 1 are $12 per square foot. Based on the above, what is the effective rent provided by each tenant. Lucy uses a 10% discount rate to make these decisions. Jacques plans to buy a property for $6,150,000 and sell it after 5 years. Expected rent is $50,000/month and cost is $15,500/month. Jake predicts a 3% annual rent increase, a 2.5% annual increase in costs, and a terminal ceiling rate of 7.5% in year 5 (applies to NOI in year 5 increase by 2 ,5%). Let’s say the sales charge is 6%. What is the IRR of the investment? What is the IRR split between cash flow and appreciation? (Must develop an annual pro forma showing work) Charles is selling the apartment he bought 4 years ago and subletting it to other Huskies. He bought the apartment for $250,000…cash…no debt. He sells it for $400,000 (thanks Seattle hot market!) and will pay 7% commission and closing costs. Since buying it, he has received an annual capital expenditure allowance of $8,300. Assuming the tax rate on capital gains is 15% and the cost of capital offset is 25%, then: Taxable income when selling Accumulated depreciation at the time of sale Depreciation tax Capital gain tax What is his network after cashing out?