LOAN SIZING

Question 1

4 LOAN SIZING METRICS

Answer 1

LTC

LTC

DSCR

DEBT YIELD

Question 2

LOAN SIZING RULE

Answer 2

USE LOWEST VALUE OF 4 METRICS

Question 3

LOAN TO VALUE

(LTV)

Answer 3

LOAN AMOUNT AS % OF PROPERTY VALUE

Question 4

LTV - FORMULA

Answer 4

LOAN AMOUNT / PROPERTY VALUE

Question 5

LTV - PROPERTY VALUE

Answer 5

= LOAN AMOUNT / LTV %

Question 6

LOAN TO COST

(LTV)

Answer 6

LOAN AMOUNT AS PERCENTAGE OF TOTAL PROJECT COST

Question 7

LTC - FORMULA

Answer 7

= LOAN AMOUNT / TOTAL PROJECT COST

Question 8

TOTAL PROJECT COST - FORMULA

Answer 8

PURCHASE PRICE

+ CLOSING COST

+ LOAN FEES

+ CONSTRUCTION COST

TOTAL PROJECT COST

Question 9

DEBT SERVICE COVERAGE RATIO

(DSCR)

Answer 9

NOI AS PERCENTAGE OF ANNUAL DEBT SERVICE

Question 10

WHAT DOES DSCR TELL YOU?

Answer 10

NOI ABILITY TO COVER ANNUAL DEBT SERVICE

Question 11

DSCR - FORMULA

Answer 11

= ANNUAL NOI / ANNUAL DEBT SERVICE

Question 12

DEBT YIELD

(DY)

Answer 12

NOI AS PERCENTAGE OF LOAN AMOUNT

Question 13

WHAT DOES DEBT YIELD TELL YOU?

Answer 13

LENDER RETURN ON LOAN IF THEY HAVE TO FORECLOSE ON THE PROPERTY

Question 14

DY - FORMULA

Answer 14

= ANNUAL NOI / LOAN AMOUNT

Question 15

LOAN CONSTANT

(LC)

Answer 15

ANNUAL DEBT SERVICE AS PERCENTAGE OF LOAN AMOUNT

Question 16

LOAN CONSTANT - EASY FORMULA

Answer 16

= ANNUAL DEBT SERVICE / LOAN AMOUT

Question 17

LOAN CONSTANT - ALTERNATE FORMULA

Answer 17

SOLVE FOR PMT OF $1 PV

+

MULTIPLY ANSWER BY # COMPOUNDING PERIODS PER YR

PV: $1

RATE: 5%

P/YR: 12

YRS: 5

PMT = .0189

.0189 X 12 = .2268 (22.68%)