Income Module Topics and Questions

1. What is the effective yield to the wrap around lender in the following wrap-around mortgage transactions: first mortgage: $52,000 loan balance, 6.5% interest, $400 payable monthly, 20 years left on loan wrap: $105,000, 9% interest, 3 points, 20 year term, $945 payable monthly.

A. 9.4%

B. 10.4%

C. 11.9% (correct answer)

D. 12.6%

2. What is the breakeven occupancy rate for the following office property given:

a. 100,000 RSF

b. Market rent: $30/RSF per year

c. Existing debt service: $1,000,000 per year

d. Fixed expenses: $1,000,000 per year

e. Variable expenses: $8/RSF occupied

A. 90,109

B. 90,909 (correct answer)

C. 91,123

D. 91,454

3. What would the property have to sell for in 3 years if the current value is $250,000 given the following information:

Property is net leased for 5 years with Year 1 Io = $20,000

Years 2-10: Io steps up $1000 per year

M = unknown but based on DCR of 1.4; terms are the same @ 7%, 25n, payable monthly, due in 10 years

holding period: 3 years

Ye = 15%

A. $255,000

B. $258,000

C. $261,000 (correct answer)

D. Cannot be determined because Yo is not given

Topics Covered in the Income Module

6 functions of $

Effective interest rates

Direct Capitalization

Forecasting Income Statement

Multipliers and Ratios

Valuing Lease Interests

% Leases

Yield Capitalization

Modified Internal Rate of Return

Net Present Value