Running Head: REAL ESTATE CALCULATIONS 1

Real Estate Calculations

Student Name

Tutor’s Name

Date
REAL ESTATE CALCULATIONS

Question 1

Loan interest rate

10/100 x 4,500,000

= 450,000

Prepayment Penalty

3/100 x 4,500,000

= 135,000

Payment Duration 25 years

It will cost Core Inc. 585,000 (450,000 + 135,000) to fully pay their loan.

New loan

Interest Rate

6.5/100 x 4,500,000

= 292,500

Origination Fees

4/100 x 4,500,000

= 180,000

Payment Duration 20 years

With the new loan terms it will cost Core Inc. 472,500 (292,500 + 180,000) to fully pay their

loan.

Despite the fact that the new loan payment duration is shorter and there is origination fee, the

interest rate is low compared to the initial loan. On top of that, the total amount needed to pay the

loan is low. Hence Core Inc. should consider refinancing the loan.
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Question 2

Purchase price = $500,000

Loan: 80/100 x 500,000

= $400,000

Financing Cost: 2.5/100 x 400,000

= $10,000

Equity Investment Required

Purchase Price – Loan + Financing Cost

500,000 – 400,000 + 10,000

= $110,000

Question 3

To calculate the total amount of annual operating expenses we add all the expense

= Lawn care + property taxes + maintenance + Janitorial + Security

= $10,000 + $24,000 + $35,000 + $25,000 + $32,000

= $126,000

We only add the total amount of annual operating expense but not the debt service

Question 4

The net present value will decline

REAL ESTATE CALCULATIONS

Reference

Heaton, R. (2020). Essential real estate investing calculations: The numbers led approach to

rental property investing and property management.

Mooney, S. P. (2017). Real estate math demystified. McGraw Hill Professional.