(12C) (11C) Loan Amount Using the Annual Loan Constant

[Eddie W. Shore]

Introduction

The program calculates the theoretical loan amount using the following factors:

* NOI: Net Operating Income. The estimated net operating income the property is expected to earn annually. An average is usually used.

* DCR: Debt Coverage Ratio. The ratio of net operating income to annual debt service, describing a company's ability to pay its debts. Generally, the larger the DCR, the better. We really don't want DCR to be below 1.

* Number of payments per year, number of years, and annual interest rate of the potential loan.

The ALC, or the annual loan constant is calculated by:

* Either divided the annual debt service by the loan amount (when the amount is known), or

* Determining the periodic payment to amortize a $100 loan given number of payments and interest rate.

Set up:
Number of payments -> N
Interest Rate -> I%YR (or periodic interest rate -> i)
-100 -> PV
0 -> FV
Solve for PMT

The ALC is expressed as a percentage.

The theoretical loan amount is calculated by:

Loan = NOI / (DCR * ALC%)

HP 12C Program: Loan Amount Using the Annual Loan Constant

Instructions:
Store the following:
NOI in R1
DCR in R2
Number of payments per year in R3
Number of periods in [ n ]
Periodic Interest rate in [ i ]

Program:
Step; Key; Code

Code:


01;  1;  1
02;  0;  0
03;  0;  0
04;  CHS;  16
05;  PV;  13
06;  0;  0
07;  FV;  15
08;  PMT;  14
09;  RCL 3;  45, 3
10;  *;  20
11;  RCL 2; 45, 2
12;  x<>y;  34
13;  %;  25
14;  RCL 1; 45, 1
15;  x<>y;  34
16;  ÷;  10
17;  GTO 00;  43, 33, 00

(* HP 12C Platinum, step 17: GTO 000; 43, 33, 000)

HP 11C Program: Loan Amount Using the Annual Loan Constant

Instructions:
Store the following:
NOI in R1
DCR in R2
Number of payments per year in R3
Number of periods in R4
Periodic Interest rate in R5

Program:
Step; Key; Code

Code:


001;  LBL A; 42, 21, 11
002;  1;  1
003;  ENTER; 36
004;  ENTER; 36
005;  RCL 5;  45, 5
006; %;  43, 14
007;  +;  40
008;  RCL 4;  45, 4
009;  CHS;  16
010;  y^x; 14
011;  *;  30
012;  1;  1
013;  RCL 5; 45, 5
014;  %;  43, 14
015;  x<>y;  34
016;  R↓;  33
017;  ÷;  10
018;  1;  1
019;  0;  0
020;  0;  0
021;  x<>y; 34
022;  ÷;  10
023;  RCL 3; 45, 3
024;  *;  20
025;  RCL 2; 45, 2
026;  x<>y; 34
027;  %;  43, 14
028;  RCL 1; 45, 1
029;  x<>y;  34
030;  ÷; 10
031;  RTN; 43, 32

Examples

Example 1:

NOI: $58,000.00
DCR: 1.25
P/Y: 12
Number of Years: 30
Annual Interest Rate: 5%

Loan Amount: $720,288.92

Example 2:

NOI: $40,000.00
DCR: 1.35
P/Y: 12
Number of Years: 20
Annual Interest Rate: 6.8%

Loan Amount: $323,464.95

Source:

Goldman, Mark H. and Stephen D. Messner "HP 12C Real Estate Applications Handbook" Hewlett Packard Rev. B. March 1984

Link: https://edspi31415.blogspot.com/2019/03/...using.html