A building has a listing price of $$1,700,000.$ Its net income is $$135,000.$ The bank imposes the following criteria:

Mortgage Rate : $3\mathrm{.}95\%$ over $25$ years

Downpayment : $30\%$

Yield required : $13\%$

Would your client be able to purchase this building and still meet the bank's requirements if he paid the asking price?

It all depends on where the building is located.

The required rate of return is too high.

No$,$ because the price paid would be higher than the estimated value of the bank.

Yes, because the posted price is reasonable in relation to net income.