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I am interested in purchasing investment property in downtown Atlanta. The one comparable property sold at $10 million last year and was 15,000 square
I am interested in purchasing investment property in downtown Atlanta. The one comparable property sold at $10 million last year and was 15,000 square feet. The property I'm interested in is also 15,000 square feet, but it generates $2.5 million in yearly revenue, as opposed to the comparable property which generates $3.4 million in yearly revenue. Both properties have predictable maintenance costs of around $1.5 million per year. The appropriate discount rate (and thus cap rate) for the maintenance cash flows is 8.0%. What cap rate would you use for the revenues, valuing them separately from the maintenance?
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To value the property based on the revenues we need to use the income approach which involves capitalizing the net operating income NOI of the propert...Get Instant Access to Expert-Tailored Solutions
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