Question

7) A Value-Added Investment: A “for sale” property has high vacancy. Based on its weak NOI...

7) A Value-Added Investment: A “for sale” property has high vacancy. Based on its weak NOI and the seller’s valuation, the property has a cap rate of 3%. Because of the risk (empty space), you are willing to purchase the property at a much higher (above market) going-in cap rate, even though the market has an overall cap rate of 8%. It is your belief that you have found some niche tenants for the property. In the first year, NOI is expected to increase by 100% as the property stabilizes. After that, NOI growth is expected to be 2.5% per year. In five years, you expect the going-out cap rate to be 7%. If you can pull this off, what IRR do you anticipate on this investment?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You plan to purchase a property which has an expected NOI of $200,000. You plan to...
You plan to purchase a property which has an expected NOI of $200,000. You plan to borrow $1,500,000 at a 5% annual rate for 30 years. What is the DCR for this investment? If the property in #9 is being purchased at an 8% cap rate, assuming the same loan information what is the LTV for this purchase? show work
A property has an expected first-year NOI of $1 million. Recent sales of similar properties indicate...
A property has an expected first-year NOI of $1 million. Recent sales of similar properties indicate that a first-year (or going-in) cap rate of 12% is reasonable for valuation purposes. A lender requires a minimum DSCR of 1.25x and will loan up to 75% of appraised value on a first mortgage. Say the mortgage interest rate is 6.75%, payments are monthly, and the amortization period is 20 years. (10 points)  Hint: solve for the debt service. what is the implied loan...
A client has requested advice on a potential investment opportunity involving an income-producing property. She would...
A client has requested advice on a potential investment opportunity involving an income-producing property. She would like you to determine the internal rate of return of the investment opportunity based on the following information: expected holding period: years; end of first year NOI estimate: $110,000; NOI estimates in subsequent years will grow by 6 % per year; price at which the property is expected to be sold at the end of year 5: $1,615,205.22; current market price of the property:...
Please do it manually A client has requested advice on a potential investment opportunity involving an...
Please do it manually A client has requested advice on a potential investment opportunity involving an income producing property. She would like you to determine the internal rate of return of the investment opportunity based on the following information: Expected Holding Period: 3 years; End of first year NOI estimate: $5,000; NOI estimate in subsequent years will grow by 5% per year; The property is expected to be sold at the end of year 3: $20,000; Current market price of...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT