A real estate developer is evaluating a 40-unit apartment development. The expected average occupancy is 90%....

A real estate developer is evaluating a 40-unit apartment development. The expected average occupancy is 90%. Cost of land: $1,200,000 Construction: $$4,800,000 Project Life: 25 years Maintenance: $100 per unit per year (regardless of weather a unit is occupied). Annual insurance and property taxes: $400,000 Required return: 12% per year (0.9489% per month) Assume that the building will have NO salvage value at the end of 25 years, BUT the land will appreciate at a rate of 5% per year. Determine the total minimum monthly rent (all units combined) that should be charged, given the required return. (Round your answer to the nearest dollar. Do not enter the $ symbol or use commas.)

Solutions

Expert Solution

jeff jeffy answered 5 months ago

Next > < Previous

Related Solutions

Linear Programming: A real estate developer is planning a new mini apartment complex. Three types of...

Linear Programming: A real estate developer is planning a new mini apartment complex. Three types of units can be built: one-bedroom apartments, two-bedroom apartments, and three-bedroom apartments. Each one-bedroom apartment requires 700 square feet; each two-bedroom apartment requires 850 square feet; and each three-bedroom apartment requires 1,250 square feet. The developer wants to keep a mix of apartment types in the complex. He believes that the number of one-bedroom apartments should be at least 15% of the total number of...

A real estate development firm is looking to invest in a new apartment complex that requires...

A real estate development firm is looking to invest in a new apartment complex that requires an initial investment of $8 million today. This project will yield free cash flows of $1 million each year for the next 15 years (from t=1 to t=15). The firm is financed half with equity and half with bonds (assume no cash). The firm's beta is 1.5, the yield to maturity on its debt is 6.0%, and its tax rate is 20%. If the...

1. A real estate developer is assessing an area for future retail development. She believes it...

1. A real estate developer is assessing an area for future retail development. She believes it is only profitably to develop a retail outlet in this area if a medical facility or industrial facility is built in the general vicinity within the next 5 years. Typically industrial facilities precede the development of medical facilities. Using this knowledge and some market research, she has arrived at the following probabilities. The overall probability that an industrial facility will be built in the...

Real estate investment As an example, suppose that the subject property is a 20-unit apartment complex....

Real estate investment As an example, suppose that the subject property is a 20-unit apartment complex. Three recent sales of comparable properties have been discovered and the data has been verified with sellers and buyers. The three areas are as follows: Comparable Sales Price Units Potential Gross Income #1 $600,000 25 $100,000 #2 $750,000 30 $128,000 #3 $450,000 18 $74,000 PGI of Subject (Potential Gross Income)=$82,000 Comparable #1 offers amerities and location nearest to the subject property but has superior...

Which of the following statement about the real estate development is FALSE ? Real estate development...

Which of the following statement about the real estate development is FALSE ? Real estate development includes five stages: land acquisition, construction, completion and occupancy, management and sales. The real estate development project subjects to the financial risk, scheduling risk and design risk in the construction stage. The most risky stage in the real estate development process is the sales stage. The most risky stage in the real estate development process is the land acquisition stage. Which of the following...

A real estate office handles a 60-unit apartment complex. When the rent is $530 per month,...

A real estate office handles a 60-unit apartment complex. When the rent is $530 per month, all units are occupied. For each $25 increase in rent, however, an average of one unit becomes vacant. Each occupied unit requires an average of $30 per month for service and repairs. What rent should be charged to obtain a maximum profit?

A real estate developer plans to build an apartment building near a major university aimed at generating rental income from graduate students.

Real Estate DevelopmentA real estate developer plans to build an apartment building near a major university aimed at generating rental income from graduate students. Four types of apartment are being considered in the planning process: studio apartments and 1, 2 or 3-bedroom units. It is assumed that studio apartments will be 500 sq. ft., 1-bedroom units will be 700 sq. ft., 2-bedroom units will be 800 sq. ft. and 3-bedroom units will be 1,000 sq. ft.The develop does not believe that the...

Option #1: Case: Mayfield Real Estate Development Valuation Mayfield Real Estate Development is a company that...

Option #1: Case: Mayfield Real Estate Development Valuation Mayfield Real Estate Development is a company that owns and operates a number of real estate ventures. The company also engages in real estate acquisitions and sales of properties, some of which are properties the company no longer wishes to operate. Similar real estate firms earn a 15-percent rate of return. Mayfield reported the following earnings over the last five years: Year Operating Income Gain(Loss) on Sale of Assets Net Income 1...

A real estate developer is considering investing in a shopping mall on the outskirts of Atlanta,...

A real estate developer is considering investing in a shopping mall on the outskirts of Atlanta, Georgia. Three parcels of land are being evaluated. Of particular importance is the income in the area surrounding the proposed mall. A random sample of four families is selected near each proposed mall. Following are the sample results. At the .05 significance level, can the developer conclude there is a difference in the mean income? Use the usual six-step hypothesis testing procedure.

You are a real estate developer and are trying to determine the EMV of your net...

You are a real estate developer and are trying to determine the EMV of your net commission from a sales call to a potential purchaser. Assume that your transportation cost is $1.45 per mile Assume that the sales call is 70 miles round trip Assume that your transportation time is 2.25 minutes per mile Assume that the value of your time for transportation is $55.00 per hour Assume that it will take 3 hours to meet with the potential purchaser...

Subjects