1. You consider buying an office building where are expect to collect $42K/month in rent and spend 14K/month on operating expenses during the first year. The asking price on this building is $5.0M. You project that the NOI of the building will grow at 2.5% per year indefinitely, and that you will be able to sell the property in 5 years for a CAP of 6.25%.
2. 1. What is your going in CAP if we were to pay the asking price?
   2. How will your going in CAP change if you can negotiate a purchase price that is $400K below the asking price? Will that affect your expected return if you still hold the same projections about income, expenses and NOI growth?
   3. For how much do you expect to sell the building in 5 years?
   4. All other things equal, for how much do you expect to sell the building in 5 years if due to change in management and improved efficiency you collect 45K/month in rent and spend only 12K/month on operating expenses during the first year?