A 30-unit apartment building should last 40 years, when it will need to be either replaced or undergo major renovation. Assume the buildings value will be 10% of its construction cost. Assume it will be sold, and that the lands cost will be recovered in full.

$2.2M Land

$4.3M Building

$50,000 Annual operating and maintenance

2% Annual property taxes and insurance (% of initial investment)

6% Vacancy rate

(a)If the owner wants a 6% rate of return, what is the required monthly leasing cost for each unit? 38 WPU-QSF-ACAD-82A Rev. 00 (09.15.20)

(b)If turning 2 units into an exercise facility would decrease the vacancy rate by 5%, would that be a good decision?

(c) Using rental rates in your community, how big are each of the 30 units?