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Good deaths occur when people die _____.

Which did you answer?  (For questions 21-28 write SKIP for the 3 you do not want me to grade). Which 3 did you write SKIP?  

Answer 5 of these 7 questions (For questions 13-19 write SKIP for the 2 you do not want me to grade).   Name 3 of the motivations for investing in real estate income property?

a property is expected to have Net Operating Income of $100,000 in the first year. The NOI is expected to increase by 5% each year thereafter. The appraised value of the property is currently $1.25 Million and the lender is willing to make a $1,125,000 participation loan with a contract interest rate of 5.5%. The loan will be amortized with monthly payments over a 20 year life. In addition to the regular mortgage payments, the lender will receive 50% of the NOI In EXCESS of $100,000each year until the loan is repaid. The lender will also receive 50% of any increase in the value of the property.  Assume that the appraiser will estimate the value of the property in Year 3 by dividing the NOI of year 4 by an 8 percent Cap Rate. Calculate the cost to the borrower (which is also the cost to the lender) if the property is held for 3 years.  

Answer 5 of these 7 questions (For questions 13-19 write SKIP for the 2 you do not want me to grade).  When an income producing property is sold (as compared to a personal residence) how is the depreciation recapture treated compared to any capital gains?  

Answer 5 of these 8 questions (For questions 21-28 write SKIP for the 3 you do not want me to grade).     What is meant by a participation loan?  What does the lender participate in?  Why would a lender want to make a     participation loan?  Why would an investor want to obtain a participation loan?

Answer 5 of these 8 questions (For questions 21-28 write SKIP for the 3 you do not want me to grade).    A.  When do you graduate? B.  In what ways do you think that this course will be useful to your in the future personally and professionally? C. What did you like most about the course?   D. What suggestions do you have for me when I teach this class next year?   E.  How many of the zoom meetings did you attend, and how many did you watch?  Were they useful to you?    

For which 2 questions did you write SKIP?  (IF you did not write skip for 2 questions, please go back and do so.  If you wrote SKIP for more than 2, remove the excess).

Work this Problem You are an employee of University Consultants, Ltd., and have been given the following assignment.  You are to present an investment analysis of a new small residential income-producing property for sale to a potential investor.  The asking price for the property is $1,600,610; rents are estimated at $240,000 during the first year and are expected to grow at 2 percent per year thereafter.  Vacancies and collection losses are expected to be 7 percent of rents.  Operating expenses will be 40 percent of effective gross income.  A 75 percent loan can be obtained at 8 percent interest for 25 years(with monthly payments).  The property is expected to appreciate in value at 3 percent per year and is expected to be owned for THREE years and then sold.  In addition, the investor tells you she would also like to know how tax considerations affect your investment analysis.  You determine that the building represents 80 percent of value and would be depreciated over 30 years (use 1/30 per year).  The potential investor indicates that she is in the 36 percent tax bracket and has enough passive income from other activities so that any passive losses from this activity would not be subject to any passive activity loss limitations.  Capital gains from price appreciation will be taxed at 20 percent and depreciation recapture will be taxed at 25 percent.              A.  What is the annual debt service? .           B.  What is the first-year debt coverage ratio?             C.   What are the Before Tax cash flows for each year? (Include the before tax cash from from the sale of the building assuming selling costs of 2% of the sales price).             D.   What is the terminal capitalization rate?  (do not include the selling costs in the calculation)             E.   What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)             F.   Calculate the After Tax Cash Flows for each of the 3 years.             G.  What is the NPV using a 14 percent discount rate?  What does this mean?             H.   What is the investor’s expected after-tax internal rate of return on equity invested (ATIRR)? 

A property produces an 8.92 percent ATIRR on the total investment considering a tax rate of 28 percent. What is the maximum interest rate that could be paid on debt without causing the leverage to be negative?