Choosing a real estate investment

Comparing Real Estate Investments

Suppose Musashi wants to invest in real estate and is considering two different residential properties. Based on the expected incomes and operating

expenses of each, he estimates that the first property $($property A$)$ has an NOI of $$50,000$ and that the other $($property B$)$ has an NOI of $$32,000.$

If the cap rate is $9\%,$ property A has an estimated value of

and property $B$ has an estimated value of

$.$ In deciding between these two properties, it is important for Musashi to consider other factors. If he is a first$-$time investor,

he is probably better off investing in

$\_.$ property. $($Note: Round your answers to two decimal places.$)$

Alternatively, Musashi might want to consider investing in a real estate investment trust $($REIT$),$ a type of investment company that operates similarly

to

mutual fund. Which of the following statements regarding REITs are true? Check all that apply.

They can increase the diversification of individuals who are already invested in the stock market.

They allow individuals to buy shares in a real estate$-$based stock portfolio.

The value of REITs tends to move in the same direction as the general stock market.

All REITs own income$-$producing real estate such as office buildings and hotels.