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Please answer all 5 parts of this question, Failure to do so will result in a downvote! The subject is: Valuation using Income Approach An

Please answer all 5 parts of this question, Failure to do so will result in a downvote!

The subject is: Valuation using Income Approach

An appraiser appraises a food court and lounge and provides the following assessment:

  • The building consists of 2 floors with the following (6) properties:
    • 1st floor (3) fine dining restaurants:
      • (1) - Charles Mulligans Steakhouse - rents for $3250/month
      • (2) - Toms Bistro - rents for $2400/month
    • 2nd floor (1) bar/lounge and (2) fast food joints (same company)
      • Snakehole Lounge - rents for $3200/month
      • (2) Paunch Burgers (fast food) - rents for $1200/month
  • Vacancy and Collection Losses: 6% per year
  • Miscellaneous Income: $1550 per year
  • Operating expenses: 30% per year
  • Capital expenditures: 6% per year

  1. What is the estimated Potential Gross Income (PGI)?
  2. What is estimated Effective Gross Income (EGI)?
  3. What is the estimated Net Operating Income (NOI)?
  4. Suppose the average overall capitalization rate for the comparable properties is 7.65%. What is the indicated value of the subject property using the cap rate?
  5. Now suppose this is a small income-producing property and the average Effective Gross Income Multiplier (EGIM) for the comparable is 8.64. What is the indicated value using the EGIM?

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