Free calculator · Debt & Financing
Construction Take-Out Sizing
Sizes the permanent take-out loan to the smallest of the LTV, DSCR, and debt yield tests on the stabilized property, then nets it against the construction loan to show cash returned or the gap to fill. Inputs are stabilized NOI and value, the three sizing constraints, a mortgage constant, and the construction loan balance.
Interactive Tool
Construction Take-Out Sizing
Stabilized property
Lender tests
Payoff
Your turn
Size the permanent loan that takes out the construction loan, and say whether the sponsor gets cash back or has a gap to fill.
The project has stabilized at $1,500,000 of NOI and appraises at $30,000,000. The permanent lender will go to 65% LTV, requires a 1.25× DSCR on a mortgage constant of 6.50%, and holds a 9.00% debt yield floor. The construction loan to be repaid is $15,000,000.
Report the cash to the sponsor as a positive number, or a shortfall as a negative one.
Round to the nearest dollar. Within 1% counts as correct.
Permanent loan less the construction loan repaid. Within $25,000 counts as correct.
Learn the concept
This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.