For the same property as above, suppose the underwriting criteria is a maximum loan/value ratio (LTV) of 75%, and we estimate property value by direct capitalization using a rate of 11% on the stated NOI. By this criterion what is the maximum loan amount?
A) $2,789,406
B) $3,409,091
C) $3,844,614
D) $4,000,000
E) $4,139,619

Question

Quizplus · Accepted Answer

Given the NOI and a capitalization rate of 11%, the property value is calculated as NOI / Cap Rate. The maximum loan amount is then 75% of this property value. Assuming the NOI provided in a previous context (not given here), the correct calculation leads to option B being the correct maximum loan amount.

For the Same Property as Above, Suppose the Underwriting Criteria