hard · National Real Estate Exam
An income property is bought with a loan sized to an 8% debt-service-constant cap and a 1.25 minimum debt coverage ratio. The property's net operating income is $150,000.
Which constraint controls the maximum loan amount, and what is that amount?
- The DCR controls, allowing $1,500,000, because dividing NOI by the constant gives the larger figure
- The debt-service constant controls, allowing $1,500,000, because NOI divided by the 0.08 constant exceeds the DCR-based amount
- The DCR controls, allowing $1,875,000, because the lower of the two loan amounts always governs and DCR yields it
- The debt-service constant controls, allowing $1,875,000, because the lower resulting loan amount governs and the constant yields it
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