Answered step by step
Verified Expert Solution
Link Copied!
Question
1 Approved Answer

Ann is looking to buy an office building in 2014. She plans to rent it out for 5 years (2015-2019) and sell it at the

Ann is looking to buy an office building in 2014. She plans to rent it out for 5 years (2015-2019) and sell it at the end of 2019.

Given:

Square feet 60,000.00
Annual rent per square foot 2015 $55.00
Parking income 2015 $65,000.00
Rental vacancy rate 2015 2.40% % per square foot
Collection loss rate 2015 2.00% % of PGI
Operating expense rate 2015 47.00% % of EGI

Asking cap rate 2014: 6.50%

2015:
Rental Income $3,300,000.00
Parking $65,000.00
Potential Gross Income (PGI) $3,365,000.00
Vacancy Expenses $79,200.00
Collection losses $67,300.00
Effective Gross Income (EGI) $3,218,500.00
Operating Expenses $1,512,695.00
Net Operating Income (NOI) $1,705,805.00

Question:

1. If this building is being sold in 2014 at an asking cap rate of 6.50%, what is the asking price?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image
Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Implementing Change With Clinical Audit

Authors: Richard W. Baker, Hilary M. Hearnshaw, Noelle Robertson

1st Edition

0471982571, 978-0471982579

More Books

Students explore these related Accounting questions