Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are buying a mismanaged 64-unit apartment building for $3,000,000. Rents are $800 per unit per month and expenses are $500 per unit per month,
- You are buying a mismanaged 64-unit apartment building for $3,000,000. Rents are $800 per unit per month and expenses are $500 per unit per month, but the property is 10% vacant. You think you can turn the property around in three years by increasing rents $75 per year at each unit, keeping operating expenses constant. Vacancy will decrease to 7.5% in year 2 and 5% in year 3.
The bank requires you put 25% down. Terms include a 25-year amortization at 4.0%. You can sell the property for $3,500,000 at the end of year 3. There is a 3% prepayment penalty.
You have a second investment opportunity to invest in a new technology that as a preferred investor would generate a 30% return on your money.
Should you make this real estate investment or invest in the tech opportunity?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started