You have just completed the appraisal of an office building and have concluded that the market...

 

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You have just completed the appraisal of an office building and have concluded that the market value of the property is $3,500,000. You expect Potential Gross Income (PGI) in the first year of operations to be $518,000; vacancy and collection losses to be 5 percent of PGI; operating expenses to be 40 percent of Effective Gross Income (EGI), and capital expenditures to be 6 percent of EGI. (Assume "above-the-line" treatment of capital expenditures.) What is the implied going-in capitalization rate? You have just completed the appraisal of an office building and have concluded that the market value of the property is $3,500,000. You expect Potential Gross Income (PGI) in the first year of operations to be $518,000; vacancy and collection losses to be 5 percent of PGI; operating expenses to be 40 percent of Effective Gross Income (EGI), and capital expenditures to be 6 percent of EGI. (Assume "above-the-line" treatment of capital expenditures.) What is the implied going-in capitalization rate?

Answer rating: 100% (QA)

To calculate the implied goingin capitalization rate we need to find the Net Operating Income NOI an... View the full answer