Hi everyone,
In the course CDs, does anyone remember Dave’s “experimental theory” on the maximum price a park can be sold for (assuming the loaning bank uses a realistic DCR around 1.2 to 1.3 and the buyer pays down around 25% or so)? Starting with an NOI (we’ll say 100k) and a DCR (well say 1.25) we can assume the bank wouldn’t want to lend on any more than a payment of 80k annually (100k/1.25). He then uses a “factor” he came up with (which depends on the interest rate and loan term) that is divided into the 80k which gives the maximum amount that can be borrowed by a bank for a given NOI. Does anyone know how to calculate the factor? Thanks!