Background for Question #1:
Use the below template
Analysis of Income
For each type of market rate apartment (studio, 1-bedroom, 2-bedroom, 3-bedroom, and 4-bedroom), determine if the subject’s free market rent falls within the range that is in the Summary of Comparable Apartment Rentals (Step #1).
For example, studio apartments have a comparable range of $1900 to $2325. Does every single studio apartment rent on the Subject Property Rent Roll (spreadsheet attached) fall within that range? If not, use the mean rent from the Summary of Comparable Apartment Rentals as the rent to be used in your proforma projection. If every apartment falls within the range, use the landlord’s provided rent information in your proforma.
For each type of non-market rate apartment (rent controlled or rent stabilized) (studio, 1 bedroom, 2-bedroom, 3- bedroom, and 4-bedroom), assume that the rent provided in the Subject Property Rent Roll is accurate (i.e., it is the legal rent). Use what is provided as the rent to be used in your proforma projection.
For vacancy, use the figure from Costar Report on the local submarket of the subject property (Clinton Hill).
Analysis of Expenses
For each expense line item (Insurance, Common Area Utilities, Heat/Fuel, Water & Sewer, Payroll & Related, Repairs & Maintenance), determine if the subject’s 2020/21 expense line-item projection falls within the per unit range that is in the Comparable Apartment Building Expenses.
For example, for the Insurance line-item the comparable range is from $434 to $502 per unit. Does the insurance figure submitted by the landlord in the Pro Forma Expenses (see Week#1_uploads.xls sheet tab “Assignment#1_expenses”) fall within that range? If not, use the mean insurance per unit from the Comparable Apartment Building Expenses table (week#1 PPT #27) as the insurance per unit figure in your proforma projection. If the landlord’s information falls within the range, you use that in your proforma projection.
For real estate taxes use the 2021 real estate taxes figure of $258,292 (week#1 PPT slide#29)
For reserve for replacement use the estimated amount of $150 per unit
For management and professional fees use the estimated amount of 3% of the Effective Gross Income (EGI)
Choice of Capitalization Rate
Use the mean capitalization rate from the (comparable capitalization rate survey).
Question #1: (2 points)
Given the above what is the value of 419 Vanderbilt Avenue?
Question #2: (8 points)
Use the following assumptions to answer the questions below:
Cost of the asset: the value calculated in question #1
Vacancy: 2%
Growth rate of income: 3%
Growth rate of expenses: 3.5%
Interest rate: 8%
Loan-to-value: 70%
Amortization: 30 Years
Hold period: 10 years
a) What is the cash flow after financing for Years 1 through 10? (4 points)
b) After 10 years you decide to refinance using the year 10 free and clear cash flow, a capitalization rate of 4%, and a loan to value ratio of 80%. What is the net new cash for the investor? Assume that prior to refinancing the mortgage terms were also: Interest rate=8%; Loan to value=70%; amortization=30 years. (4 points)
Background for Question #1: Use the below template Analysis of Income For each t
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