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# 590 10

Chapter 15, 16, 18

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### 590 10

1. 1. Chapter 15
2. 2. Chapter 15 Mortgage Calculations
3. 3. What would you rather have?
4. 4. What would you rather have? 1,000 in 5 years
5. 5. What would you rather have? 1,000 in 5 years or
6. 6. What would you rather have? 1,000 in 5 years or 2,000 in 10 years?
7. 7. What would you rather have?
8. 8. What would you rather have? Years 5 10
9. 9. What would you rather have? Years 5 10 FV 1,000 2,000
10. 10. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09
11. 11. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01
12. 12. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
13. 13. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
14. 14. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
15. 15. Five Characteristics
16. 16. Five Characteristics payment amount & frequency
17. 17. Five Characteristics payment amount & frequency loan balance
18. 18. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR)
19. 19. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR) effective borrowing cost
20. 20. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR) effective borrowing cost present value of the debt
21. 21. Loan Balance
22. 22. Loan Balance calculate the present value of the remaining payments
23. 23. Loan Balance
24. 24. Loan Balance 100,000 at 30 years at 10%
25. 25. Loan Balance 100,000 at 30 years at 10% PMT 10,607
26. 26. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years?
27. 27. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years? 20 years at 10% at 10,607
28. 28. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years? 20 years at 10% at 10,607 PV 90,303
29. 29. Lender Yield (IRR)
30. 30. Lender Yield (IRR) 100,000 at 30 years at 10%
31. 31. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607
32. 32. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000
33. 33. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000 95,000 at 30 years at 10,607
34. 34. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000 95,000 at 30 years at 10,607 i = 10.63%
35. 35. Chapter 16
36. 36. Chapter 16 Commercial Mortgages
37. 37. Commercial vs. Residential
38. 38. Commercial vs. Residential more risk
39. 39. Commercial vs. Residential more risk shorter terms
40. 40. Commercial vs. Residential more risk shorter terms higher down LTV
41. 41. Commercial vs. Residential more risk shorter terms higher down LTV non-recourse
42. 42. Commercial Loans
43. 43. Commercial Loans Construction Loan Permanent Loan
44. 44. The Note
45. 45. The Note payment amount and timing penalties for late payments insurance maintenance default
46. 46. Interest Only
47. 47. Interest Only pay only interest
48. 48. Interest Only pay only interest pay principal balance at maturity
49. 49. Interest Only pay only interest pay principal balance at maturity
50. 50. Interest Only pay only interest pay principal balance at maturity “bullet loan”
51. 51. Interest Only pay only interest pay principal balance at maturity “bullet loan”
52. 52. Balloon Mortgage
53. 53. Balloon Mortgage amortize over 25-30 years
54. 54. Balloon Mortgage amortize over 25-30 years maturity 5-15 years
55. 55. Balloon Mortgage amortize over 25-30 years maturity 5-15 years
56. 56. Balloon Mortgage amortize over 25-30 years maturity 5-15 years must be prepared to payoff loan at maturity
57. 57. Balloon Mortgage amortize over 25-30 years maturity 5-15 years must be prepared to payoff loan at maturity
58. 58. Ratios
59. 59. Ratios LTV - loan to value ratio loan ÷ value DCR - debt coverage ratio NOI ÷ debt service
60. 60. DCR
61. 61. DCR 1.3 to 1.5
62. 62. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment?
63. 63. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment? cushion to cover
64. 64. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment? cushion to cover
65. 65. Chapter 18
66. 66. Chapter 18 Investment Decision Ratios
67. 67. Yield Analysis
68. 68. Yield Analysis How can you improve yield? ! Leverage
69. 69. Two Elements
70. 70. Two Elements Equity - owner
71. 71. Two Elements Equity - owner Debt - lender
72. 72. Yield Analysis
73. 73. Yield Analysis Purchase Price 1,000,000
74. 74. Yield Analysis Purchase Price 1,000,000 NOI 100,000
75. 75. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0%
76. 76. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000
77. 77. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30
78. 78. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30 Rate 8.0%
79. 79. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30 Rate 8.0% Payment 66,621
80. 80. Yield Analysis
81. 81. Yield Analysis
82. 82. Yield Analysis Value
83. 83. Yield Analysis Value NOI
84. 84. Yield Analysis Value NOI Rate
85. 85. Yield Analysis Total Value NOI Rate
86. 86. Yield Analysis Value NOI Rate Total 1,000,000
87. 87. Yield Analysis Value NOI Rate Total 1,000,000 100,000
88. 88. Yield Analysis Value NOI Rate Total 1,000,000 100,000 10.0%
89. 89. Yield Analysis Debt Value NOI Rate Total 1,000,000 100,000 10.0%
90. 90. Yield Analysis Value NOI Rate Debt 750,000 Total 1,000,000 100,000 10.0%
91. 91. Yield Analysis Value NOI Rate Debt 750,000 66,621 Total 1,000,000 100,000 10.0%
92. 92. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Total 1,000,000 100,000 10.0%
93. 93. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity Total 1,000,000 100,000 10.0%
94. 94. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 Total 1,000,000 100,000 10.0%
95. 95. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 33,379 Total 1,000,000 100,000 10.0%
96. 96. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 33,379 13.4% Total 1,000,000 100,000 10.0%
97. 97. Excel Yield Analysis
98. 98. Effective Gross Income Multiplier
99. 99. Effective Gross Income Multiplier Price ÷ EGI
100. 100. Operating Expense Ratio
101. 101. Operating Expense Ratio Expenses ÷ EGI