The NOI for a small income property is expected to be $151,500 for the first year. Financing
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- The NOI for a small income property is expected to be $151,500 for the first year. Financing will be based on a 1.2 DCR applied to the first year, NOI, will have a 10 percent interest rate, and will be amortized over 20 years with monthly payments. The NOI will increase 4 percent per year after the first year. The investor expects to hold the property for five years. The resale price is estimated by applying a 9 percent terminal capitalization rate to the sixth-year NOI. investors require a 13 percent rate of return on equity ( equity yield rate) for this type of property
- a. What is the present value of the equity interest in the property?
- b. What is the total present value of the property (mortgage and equity interests)?
- c. Based on your answer to part (b), what is the implied overall capitalization rate?
Related Book For
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
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