Real Estate Investments question, mortgage, something, only, first

Kapie

Going thru AI again (been a few weeks) and I'm stuck on something silly..

Calculating the income tax payable

NOI - Depreciation (straight line) - Interest paid = taxable income

taxable income * tax rate = Income tax payable


In R47, pg 17-23 they give the Douglas Mannor example. My first question is why is Depreciation based only on the $451,000 of 'improvements' instead of the entire $525,000 cost. Second question is when you calculate the monthly mortgage payment (FV=0, PV= -393,750, N=12x30 I=8/12 --> CPT pmt you get 2889.20).. perfect. This is where the wheels are rusty..

The interest paid in fig 8. is $31,381 - how is that computed. I want to take mortgage outstanding * .08 which is [ 393,770*.08= $31,500 ] but I get a number slightly higher, as expected because the monthly compounding. How do i derive this number correctly? Will it be given?

Matt



Edited 1 time(s). Last edit at Tuesday, May 24, 2011 at 09:38PM by mbolzicco.

chandsingh

i got another question on AI, hopefully i don't hijack your thread, but i would be curious to hear any responses.

Question: There are 0 EOC questions on Reading 47 (the CFAT/ERAT stuff). Anyone actually think this will be on the exam? Would seem kind of crazy to me for them to put a full item set on a property evaluation w/ zero EOC questions about it.

onelife1

Looks like testable material to me...

thecfawannabe

It's very testable, there is no EOC because the entire material is a workshop with the Douglas Mannor example starting on pg. 17.

Also think about Equities there was a whole reading on Michael Porter's Competitive Forces... no EOC. That too - will probably be tested simply on comprehension.

Sportsman

you only depreciate the 'improvements' because the residual value (525K - 451K) is presumably land which you don't depreciate.

random_walker47

*Interest expense has been determined from a loan amortization schedule. Because you
are not asked to construct an amortization table, this would either be given on the
exam, or the loan would be interest-only.

I found this on notes (pg.15). So, the interest will be given. (relieved...