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Property mogul Ronald Prumt considers buying a multi-family property at a cap rate of 5%. Consider the simple user cost model seen in class and
Property mogul Ronald Prumt considers buying a multi-family property at a cap rate of 5%. Consider the simple user cost model seen in class and assume that the after-tax mortgage rate at which Prumt can finance the purchase is 6%/year and the maintenance expenditure is 2%/year. What is the minimum expected future price appreciation such that this would be a winning deal for Prumt?
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