Fundamentals of Real Estate Question: I don’t know how to set up this question in excel.
You are considering the purchase of a retail building for 34 million today. Below you are given the information you need to analyze the investment and decide how to proceed.
Your expectations for this stabilized property include the following: 60 unit charging average monthly rents of $3000 a month; Free rent for 6 weeks for all the tenants in yer 1due to the recession, but this policy ends after year 1. 9% vacancy in year 1 due to the recession and 4% vacancy in all years thereafter; operating expense ratio of 45% but tenants for 25% of operating expense. Capital reserve equal to 10% of EGI; and leasing costs equal to 50% of vacancy losses. The cap rate goes up by 100 basis points during the time you are invested in the property, and you use this new cap rate to value the property at the time of sale, which is year 6. Your selling expenses are 2.75% of the resale price. You get a 60% LTV mortgage with a 7% interest rate. Your equity investors expect a return of 10%.
1. What is the estimate property before tax cash-flow (EBTCF) for each year of operations? please show the calculations in the form of a pro-forma.
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