I am interested in purchasing investment property in downtown Atlanta. The one comparable property sold at...
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I am interested in purchasing investment property in downtown Atlanta. The one comparable property sold at $10 million last year and was 15,000 square feet. The property I'm interested in is also 15,000 square feet, but it generates $2.5 million in yearly revenue, as opposed to the comparable property which generates $3.4 million in yearly revenue. Both properties have predictable maintenance costs of around $1.5 million per year. The appropriate discount rate (and thus cap rate) for the maintenance cash flows is 8.0%. What cap rate would you use for the revenues, valuing them separately from the maintenance? I am interested in purchasing investment property in downtown Atlanta. The one comparable property sold at $10 million last year and was 15,000 square feet. The property I'm interested in is also 15,000 square feet, but it generates $2.5 million in yearly revenue, as opposed to the comparable property which generates $3.4 million in yearly revenue. Both properties have predictable maintenance costs of around $1.5 million per year. The appropriate discount rate (and thus cap rate) for the maintenance cash flows is 8.0%. What cap rate would you use for the revenues, valuing them separately from the maintenance?
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Answer rating: 100% (QA)
To value the property based on the revenues we need to use the income approach which involves capitalizing the net operating income NOI of the propert... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
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