DSC Constrained Loan (Columbus, OH) property value = 300,000 Your friend is a mo

Question

DSC Constrained Loan (Columbus, OH) property value = 300,000

Your friend is a mortgage broker with a Fannie License. He/She has indicated that Fannie will give you a loan the lesser of “80%” or 1.25 DSCR constrained. The interest rate for the Fannie loan will be 5% and have a 30 year amortization. Based on that, what is the amount of the loan you think you can get from Fannie. Show your work/methodology for sizing both of these loans.

Total rent revenue = GPR – Vacancy – Loss

                               = 1,000,000 – 50,000 – 10,000

                               = $940,000

NOI = Total rent revenue – Total expenses

        = 940,000 – (300,000 + 175,000)

        = 940,000 – 475,000

        = $465,000 (Answer)

Explanation / Answer

LTV<=80%
=>Loan<=80%*300000
=>Loan<=2,40,000

DSCR>=1.25
=>NOI/Debt payments>=1.25
=>Annual Debt payments<=465000/1.25
=>Annual Debt payments<=372000
=>Monthly Debt payments<=31000
=>Loan<=PV(5%/12,12*30,31000)
=>Loan<=$5,774,730.13

Lesser of the two is $2,40,000

Hence, Loan=$2,40,000

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