A property is expected to generate $450,000 of net operating income over the next 12 months. Discussion with lenders leads to the conclusion that the minimum accetptable debt coverage ratio will be 1.2 and that loan terms will be 5% per annum, with 20-year amortization (monthly payments). Please show your work.
A. What is the maximum supportable annual debt service?
B. What size loan does this imply?