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1. What is the Net Operating Income for the following duplex investment? Gross I

ID: 2809475 • Letter: 1

Question

1. What is the Net Operating Income for the following duplex investment?

Gross Income                                $28,400

Vacancy                                         $2,840

Operating Expenses $13,824

Insert answer here __________________

2. Based on answer 1 o above, what is the VALUE of the duplex using a 6% cap rate?

Insert answer here __________________

3.Assume you borrowed $35,000 to buy Yocum Street. The interest rate is 3.75%, the term is 30 years and the amortization are 30 years. What is the monthly mortgage payment?

Explanation / Answer

1: NOI = Gross Income- Vacancy – Operating expenses

= 28400-2840-13824

=$11736

2: Value = NOI/ Cap rate

= 11736/6%

=$195600

3:PV= $35000

Rate = 3.75%/12 =0.003125

N = 30*12= 360

Monthly payment can be computed using PV of annuity formula

PV= P*(1-1/(1+r)^n)/r

35000 = P*(1-1/1.003125^360)/ 0.003125

P= 35000/ ((1-1/1.003125^360)/ 0.003125) = $162.09