What is the largest annual loan payment the lender will allow you to make based on the DSCR?
Real estate homework
You want to purchase an office building in Brooklyn. The property contains 112,000 square feet of rentable space and is currently occupied by multiple tenants each with differing maturities on their respective leases.
The annual rent in the 1st year of ownership is $55.50/sq ft.
The vacancy rate is 3.5%.
You expect to incur collection losses of 1.5%.
What is the Potential Gross Income for the first year?
What is the Effective Gross Income for the first year?
If operating expenses are expected to be 40% of EGI, what is the Net Operating Income generated by the property in the 1st year of ownership?
What is the largest annual loan payment the lender will allow you to make based on the DSCR?