1)You have recently been hired by a real estate investor to be her analyst. She indicates that she is considering buying a small apartment building. There are 50 suites: 10 efficiency units, 20 singles and 20 two bedroom units. Rents are currently $700, $1000 and $1300 per month respectively. There is also parking revenue of $25 per month for 40 stalls which she believes she can rent to the tenants. She has done some research and thinks the cap rate for similar properties is 6%. She is contemplating a three year hold based on her perception of the required time to benefit from the increasing activity in Northern Alberta and the spin-off benefits that will accrue to Edmonton. She believes she can increase rents for suites at 3% after the first year and 4% after the second year and for subsequent years. Parking revenue is flat. The current rents would stay in place for the initial year. Operating expenses are 30% of potential gross revenue. She would like your advice based on your analysis regarding what to pay for this property.

What is the first year NOI?

Question 13Select one:

a.

$453,600

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b.

$441,600

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c.

$520,300

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d.

None of the above

2)Based on the facts in question above, what is the cash flow including the terminal value in Year 3 based on Year 4 NOI? Please round your answer to the nearest whole number.

Question 14Select one:

a.

$8,422,203

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b.

$8,908,099

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c.

$8,891,534

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d.

None of the above