REAL 1820 Lecture Notes - Lecture 9: Debt Service Coverage Ratio, Earnings Before Interest And Taxes, Formal Methods

• School: University of Guelph
• Department: Real Estate and Housing
• Course: REAL 1820
• Professor: Jian Zhou

Document Summary

1 front-door method: cost ---> bottom-line rent --(compared to)--> actual market rent. If market rent > bottom-line rent, then go. 2 back-door method: start with market rents (possibly through market surveys), derive the maximum cost which is the most we can afford to put into the development. At the end: can we build the project at this cost or less. Market rent -----> budget (or the maximum affordable amount you can put into the project) --(compared to)--> actual cost. Total leasable square feet expected rent per square feet = expected gross income for all leasable space. Expected gross income income for all leasable space - expected vacancy cost = expected effective gross income income for only the occupied space. Expected vacancy cost = gross income * vacancy rate. Expected effective gross income for only the occupied space - projected operating expenses = expected net operating income.