1.You are bidding on a multifamily property that is presenting, according to the leases in place, Year 1 NOI of 10,000.You look around at recent sales of comparable properties and you note that, adjusting for your property conditions, your market cap rate would be 5%.Additionally, the market research indicates that the growth rate in rent will probably be as follows: +3% per year for the next 3 years, +4 % per year for the subsequent 3 years, and then 2% for the longer term.Your anticipated holding period is 10 years.For this type of property investment, you have a Return Hurdle rate of 8%.

a.What would be your direct capitalized valuation of this property?

b.What would you do to more closely determine the price you wish to bid and what Price would you bid?

c.Briefly explain the difference in these valuations .