Class 7 & 8 Mortgage Math, Direct Capitalization & Multipliers Definitions: cap rate, gross rent multiplier

 

Class 7: Mortgage Math I: Amortization

Definitions: principal, Interest-only, DSCR. Example: $5M loan, 30-year amortization, 6% interest. Debt sizing based on DSCR/LTV. Example: Maximum loan on $1M NOI with 1.25 DSCR at 6% rate.

Class 8: Direct Capitalization & Multipliers

Definitions: cap rate, gross rent multiplier. Example: NOI of $500k / 6% cap = $8.3M value.

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MORTGAGES

PV - Amount of Mortgage

Rate - Int Rate on Mortgage

Time - period to payback

FV - Zero or lump sum

OTHER IMPORTANT INDICATORS

Gross Rents Multiplier:    Value/Periodic Return

Capitalization Rates:  Income/Rate = Value    or Income/Value = Rate

Future Appreciation

Value based on future Income