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A developer plans to start construction of a building in one year if at that point rent levels make construction

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A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,000,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $150,000 and a 40 percent chance that the NOI will be $75,000. In either case, NOI would be expected to increase at 2 percent per year after the first year. How much should the developer be willing to pay for the land if he wants a 12 percent rate of return?

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The value of the land at the end of the year if the NOI is 150 000 is as follows …View the full answer


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Related Book For  answer-question
Real Estate Finance and Investments

Real Estate Finance and Investments

ISBN: 978-0073377339

14th edition

Authors: William Brueggeman, Jeffrey Fisher

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Question Details
Chapter # 13
Section: Problems
Problem: 5
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Question Posted: September 26, 2018 13:11:01
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