Comparing Real Estate Investments

Suppose Dmitri 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 $$43,000$ and that the other $($property B$)$ has an NOI of $$33,000.$

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 Dmitri 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, Dmitri 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 allow individuals to buy shares in a real estate$$based stock portfolio.

They pay dividends.

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

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