You are an investor looking to acquire a 100 unit apartment in Gainesville, FL. It is a Class A property with no major damages (no capital expenditures needed). You can purchase the property for $8,750,000 today and you charge $1,000 a month for each unit on a 12 month lease. You also believe that your rent will grow at a constant yearly rate of 1.5% and project that you will have vacancy and collection losses of 3% annually to account for any of the 100 tenants to not pay a portion of their rent. You are assuming all tenants will need parking so you charge $50 a month for their parking spot (miscellaneous income). Every year maintenance and utilities will cost you $200,000 (Operating Expenses) and it will grow at 1.5% yearly. You think that based on your market projections, you can sell your property in 5 years for $10,500,000 and you expect there to be selling expenses of 6%. You will not invest in this property unless you can realize an unlevered before tax return of 10%.

1. What are the Net Sales Proceeds?

2. What is the Net Operating Income (NOI) in year 4?

Answer rating: 100% (QA)

To calculate the Net Sales Proceeds and Net Operating Income NOI in year 4 we can break down the fin... View the full answer