1. You are considering an investment in a small medical office building in Hackensack, NJ. The asking price for the building is $3.5M and a local commercial bank has offered to provide financing in the form of a 5-year mortgage with a 25-year amortization period. The interest rate on the mortgage is 6% and payments are made on an annual basis. If the maximum loan-to-value (LTV) ratio for the loan is 60%, what are the most the lender will provide based on this condition?
2. What is your annual mortgage payment assuming that the lender will provide financing at a 60% LTV?
3. The lender also requires that the debt-coverage-ratio (DCR) for the loan be at least 1.20. If you estimate NOI in your first year of ownership to be $200,000, what is the DCR for the loan when the loan amount is based on the 60% LTV?
4. What is your equity investment in the building if the lender approves the loan amount based on a 60% LTV and requires that you pay $42,000 in origination fees at closing?
5. If the lender approves the loan amount based on a 60% LTV and the value of the property has increased by 10% in total at the time at which your loan matures, what is the value of your equity in the property at that time?