19. Consider a property with NOI of $72,000 and a debt coverage ratio of 1.2 app

Question

19. Consider a property with NOI of $72,000 and a debt coverage ratio of 1.2 applied to first year NOL. What would be the estimated monthly mortgage payment (A) $5,000 (B) $7,200 (C) S60,000 (D) $86,400 NOI DS Cash flow Resale in year 3 Less mortgage balance Total cash flow Present value ofcash flow @ 15% Year 1 Year 2 Year 3 S72,000 $74,880 $77,875 60,000 60,000 60,000 S12,000 S14,880 $17,875 900,000 -435,000 $12,000 $14,880 $482,875 $10.435 $11,251 $317,498 ation for Consider the table above for a hypothetical income property that is under consider purchase with a $455, the estimated total property value (rounded to the nearest $100)? 000 loan. Using the principles of mortgage equity capitalization, what is (A)S317,500 (B) $482,900 (C) $772,500 (D) $794,200

Explanation / Answer

19. Debt coverage ratio is the measure of net operating income available for payment of current pay obligation.

Formula of debt coverage ratio = Net operating income(NOI) / current debt obligation

In the given problem, we are asked to find out monthly mortgage payment or monthly current debt obligation, using the same formula it can be calculated by - NOI/ debt coverage ratio = $72,000/1.2 = $60,000

Monthly current obligation = $60,000 /12 = $5000. Hence the answer is Option A

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