Loan Balance/Property Value article
How is the Loan Balance/Property Value calculated for commercial real estate investments and developments? What are the factors that the Loan Balance/Property Value takes into consideration when shown in a proforma income statement, and what is ignored? Why is the Loan Balance/Property Value useful for investment real estate? These are the questions that are explored using the Proforma Example in this article.
Start a 14 Day Free Trial
|
|
Video Title: Learn about the Loan Balance/Property Value
Video Publication_Date: Friday, June 21, 2024
Video Duration: 0:52
Video Description:
The topic for this commercial real estate investment analysis video is Loan Balance/Property Value. Throughout the video planEASe Software is used to illustrate Loan Balance/Property Value. The video does not use the current Proforma Example, but all the factors that the Loan Balance/Property Value are sensitive to are covered.
|
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| Less: Loan Repayment | 2,164,359 | 2,113,745 | 2,141,394 | 2,079,651 | 2,012,784 | 1,940,367 |
| Sale Value | $3,329,006 | $3,591,128 | $3,800,275 | $3,698,723 | $3,795,175 | $3,560,371 |
| Loan Balance/Property Value | 65.0% | 58.9% | 56.3% | 56.2% | 53.0% | 54.5% |
In this case the 2012 Loan Balance/Property Value was calculated by: | 2012 Loan Balance | 2,141,394 |
| divide by 2012 Projected Sale Value | $3,800,275 |
| equals the 2012 Loan Balance/Property Value | 56.3% |
Considers: - Sale Value and Loan Balance
Ignores:- Time Value of Money, Sale Proceeds, All Financing (Loans), Other Years NOI, All Taxes
... and a lot of other things
Why is Loan Balance/Property Value useful?
Loan Balance/Property Value is the Loan Repayment amount divided by the Sale Value (both measured at the beginning of the year). This ratio measures the margin of safety for the lender's principal. This can also be an important number if you are planning to refinance.
What is the Loan Balance/Property Value Sensitive to:
Sale Value and Loan Balance
The Loan Balance/Property Value is shown in these planEASe Reports:
Written by
Michael Feakins, CCIM
of planEASe Software