You are considering purchasing an investment property that has Year 1 Effective Gross Income of $650,000 and is expected to increase by $50,000 every year. Total operating expenses in Year 1 are $230,000 and are expected to increase 2%/year. Your analysis assumes no capital and leasing costs, and that you sell the property at the end of Year 6 and earn $8.6 million after any sale costs.

If you require a 13% yield for this investment, how much would you be willing to pay for this property?

If you and the seller agree to a $6.0 million purchase price, what is your IRR for this investment?