Question: A Purdue janitor with an IU PhD is evaluating a 4 plex just off campus. He wants to know what the value of the property

A Purdue janitor with an IU PhD is evaluating a 4 plex just off campus. He wants to know what the value of the property is using the cap rate method.

Details:

o Rent is $750/month/unit

o Vacancy of the area is 10%

o Real estate taxes are $1,000/unit/year

o Utilities are $400/unit/year

o Variable expenses are $2,500/unit/year

o Interest on a $100,000 loan is 7%

o Cap rate is 10% on an investment of this type

What is the value of the investment?

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