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189 Once upon a time the following add appeared in a December, 20X8 edition of the Athens newspaper- For Sale: Apartment Building 30 Units Average
189 Once upon a time the following add appeared in a December, 20X8 edition of the Athens newspaper- For Sale: Apartment Building 30 Units Average Rent for 20x9 is expected to be $600 per month per unit 2 years old Price Upon investigation you found that it would require little or no work on your part. There was a rental agency which would keep the books, rent apartments, do evictions and other administrative tasks for 10% of the rent. Your investigation showed that the apartments stayed about 95% occupied and that occupancy rate is likely to continue. Additionally, the rental agency told you that you can expect rents to increase about 5% per year after 20X9 year for the following three years (20x0, 20X1, and 20X2) because the building is new. The repairs and maintenance costs are about $800 per month for 20x9,20x0, 20X land 20X2. After that, you expect these to rise at 5% per year. You want to earn at least 20% on your investment. You figure you will hold on to the apartment for four years and then sell it for $800,000 (on Dec 31, 20X2). All other cash expenses run $1,000 per month and will rise at 5% per year after 20X9. Assume it is Jan 1, 20X9- what is the price you would pay for the apartment? Ignore taxes
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