| Property Type | Net Operating income | Growth rate | Property value | Loan-to-value |
| Hotel | $900,000 | 7% | $9,000,000 | 70% |
return of capital to the lender = 0.02185
Hotel cap rate = market rate of capitalization = $900,000 / $9,000,000 = 10%
Return on funds = Cost of loan = i = 8% (given)
Loan = 20 years
Return of capital to lender = i/((1+i)n-1) = 0.08/((1+0.08)20-1) = 0.02185
Mortgage constant = Return on funds + Return of capital to lender = 0.08 + 0.02185 = 0.10185
| Rate | Weighted | ||
| Loan | 70% | 0.10185 | 70%*0.10185 = 0.0713 |
| Equity | 30% | 0.0957 (*2) | 0.10-0.0713 = 0.0287 |
| Total | 100% | 10% (*1) |
(*2) Equity dividend rate (required cash-on-cash return) = 0.0287 / 30% = 0.0957
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