A property has an NOI of $195,000 Using a 7.5% Cap Rate what is the value...

A property has an NOI of $195,000

Using a 7.5% Cap Rate what is the value of the property?

Using an 8.5% Cap Rate would the value be lower or higher?

If the property is being offered at $2.8M what is the indicated Cap Rate?

Expert Solution

Answer:

Capitalization Rate =	Net Operating Income(NOI)
	Market Value of the Asset

Net Operating Income(NOI) =	$195000

Calculation of value of property using 7.5% Cap rate

Market Value of the Asset =	195000/7.5%

Value of property =	$2600,000


Calculation of value of property using 8.5% Cap rate

Market Value of the Asset =	195000/8.5%

Value of property* =	$22,94,117.65

*Higher Cap rate with existing NOI would give lower property value because now the same income is generated by investing less amount, the value in terms of percentage will increase.


Calculation of Cap rate at $2.8M property value


Capitalization Rate =	Net Operating Income(NOI)
	Market Value of the Asset

=	$195000
	$2800000

=	6.96%

**Since the value of the asset is more with same NOI, Cap Rate reduces.

ekkarill92 answered 2 years ago

A property has first year NOI of $1.5 million. NOI grows at 7% during the next...

A property has first year NOI of $1.5 million. NOI grows at 7% during the next two years. In year four, NOI goes drops 50% due to a lost tenant. You are very lucky and replace the tenant. Year five NOI is 4X year four. (continues below…) What is year 5 NOI? continue…You have a $10 million mortgage on this property, at 5% interest, amortization of twenty years. There are two partners who have invested $3 million total in the...

What is the price of a 1000 par value bond with a coupon rate of 7.5...

What is the price of a 1000 par value bond with a coupon rate of 7.5 annual payments that matures 11 years assuming the bonds ytm is 3.84

A bond has a coupon rate of 7.5% paid semiannually, a par value of $1000, a...

A bond has a coupon rate of 7.5% paid semiannually, a par value of $1000, a maturity of 10 years and a yield to maturity of 9%. You are thinking about buying this bond but are unsure about the actual cash outlay required to do so. The last interest payment was December 13, 2018. If you purchase the bond, the transaction will settle on February 25, 2019. There are 75 days between these two dates. a) Find the clean price...

A property that can be purchased for $1.7 million has an expected first year NOI of...

A property that can be purchased for $1.7 million has an expected first year NOI of $190,000. An investor is considering two loan alternatives: LOAN A: A 70% loan-to-value ratio, with interest at 7.5% per annum. The loan will require level monthly payments to amortize the principle over 20 years. LOAN B: An 80% loan-to-value ratio, with interest at 8% per annum. This loan will require level monthly payments to amortize the principal over 25 years. Fore each loan, determine:...

You purchase a fully-occupied shopping center for $5,000,000. The NOI is $750,000. The property has no...

You purchase a fully-occupied shopping center for $5,000,000. The NOI is $750,000. The property has no debt. You are considering obtaining debt in order to maximize your return. If a Lender is willing to provide a loan at a 75% LTV, 3.00% rate and 20-year amortization schedule, what is your: (a) Unlevered Return, and (b) Levered Return?

Your building has been appraised at $2,000,000 using a cap rate of 10%. The lender is...

Your building has been appraised at $2,000,000 using a cap rate of 10%. The lender is willing to provide you a 5-year mortgage loan with an LTV of 70%, an amortization period of 25 years and a mortgage interest rate of 7%. What will be your DSCR? a. 1.9 b. 1.5 c. 0.7 d. 1.4 e. 1.7

Suppose in a certain property market the typical lease term is 5 years, the cap rate...

Suppose in a certain property market the typical lease term is 5 years, the cap rate (cash yield) is 8%, long term property value and rental growth rate is 2.0% per year, leases provide rent step-ups of 2.0% per year (per the expected growth rate), and the tenant borrowing rate (intralease discount rate) is 6%. What is the appropriate inter-lease discount rate?

If a floating-rate note has a cap, who can benefit from thisfeature (the cap)? If...

If a floating-rate note has a cap, who can benefit from this feature (the cap)? If it has a floor, who can benefit from the floor? Explain A floating-rate note with $1000 par value makes coupon payments quarterly. The coupon rate is determined by LIBOR plus 28 basis points. Calculate the coupon rates and coupon payment on the following date using the information available.

The present value of $200 due in 2 years at a discount rate of 7.5%.

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. a) What is the...

Question