Use the direct capitalization method described in the lecture, and the resources posted on the page this week to help you answer this scenario-based question.

Imagine that you work in acquisitions for a local group of investors, and they want to buy apartment buildings in suburban Milwaukee.

You heard from a trusted reliable source that someone you know might be interested in selling an older “Class B” 195-unit building, built in the 1980s and that’s exactly what your firm is looking to buy.

The owner of the apartment building hasn’t listed the property yet, and you’d like to get a fair offer from them before they decide to list it.

What could the building be worth? What factors did you take into consideration for this valuation?

average rent: $869

vacancy rate: 3.6%

expense ratio: 50.2%