Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You would like to buy an industrial property in Pointe-Claire that has two tenants occupying all of the leasable area. The current owner provides you

You would like to buy an industrial property in Pointe-Claire that has two tenants occupying all of the leasable area. The current owner provides you with the following information.

  • One tenant has six years remaining on his lease.It is a triple-net lease with a base rent of $50,000 per year for 5,000 square feet.The tenant has always paid his rent on time.
  • The second tenant has 4 years remaining on his lease.It is a double-net lease with a base rent of $30,000 per year for 4,000 square feet.The tenant has always paid his rent on time
  • There is a small common area of 1,000 square feet.
  • The owner provides you with an income statement showing the following expenses for last year.Maintenance expenses are expected to increase by $2,000 starting this coming year.All other expenses are not expected to change.

Property taxes $8,000

Income taxes $7,000

Property insurance $5,000

Snow removal $1,000

Maintenance $5,000

Management and Other $3,000

Depreciation $6,000

  • The property has no expected vacancy or credit losses.
  • The owner has allowed a local company to put up a sign on the side of the building for $1,000 per year.
  • The capitalization rate for comparable properties is 10%.

Calculate the value of the property using the Income Capitalization Approach.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Financial Management

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

10th Edition

978-0324289114, 0324289111

More Books

Students also viewed these Finance questions

Question

Constructasetofdataforwhichthemeanandmedianareidentical.

Answered: 1 week ago