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Due to the market condition one gas decided to seek technical advice from industry experts. The...

Due to the market condition one gas decided to seek technical advice from industry experts. The situation is as follows: The property is an income generating that is offered in the market for shs 4.5 million. Projected net operating income (NOI) is shs 50,000 and the general market rate is 15.5%. Use the above given data to deduce a market value of property, then advice the investor.

Solutions

Expert Solution

NI = 50,000; Capitalization rate, r = 15.5%

Hence, market value of the property = NOI / r = 50,000 / 15.5% =  shs 322,581

Deduced market value = shs 322,581 which is far lower than the offered price of shs 4.5 million.

Hence, the offered price in the market is very very high in comparison to NOI based market value.

jeff jeffy answered 2 years ago
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