Suppose You Are Considering the Purchase of an Apartment Building

question 28

Multiple Choice

Suppose you are considering the purchase of an apartment building that has 12 units that can be rented out at $1,050 per month. You have estimated operating expenses and expected vacancy and collection losses for the first year to be $35,700 and $30,240, respectively. You also have estimated that you will be able to generate an additional $3,840 in the first year from garage rentals on the property. If the expected purchase price of the property is $1,100,000 and you are planning on making a 10% down payment, calculate the debt yield ratio.

• A) 8.10%
• B) 8.61%
• C) 9.00%
• D) 12.05%

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