The gross rental income for an apartment building allowing for vacancies is $500,000. Estimated expenses total $200,000. If the capitalization rate is 10%, the value of this building using the direct capitalization approach is closest to:
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NOI = 500,000 ? 200,000 = 300,000 MV = NOI / Capitalization rate = 300,000 / 0.10 = 3,000,000
[此贴子已经被作者于2011-4-2 11:27:45编辑过]
All of the following variables might be factors when calculating the net operating income (NOI) for a property EXCEPT:
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Insurance expenses and collection losses for a property are all factors in the NOI calculation. Depreciation is not a factor when calculating NOI because a basic, underlying assumption is that routine repairs and maintenance will keep the property in its existing condition.
An investor is considering purchasing an office building that is currently 95% leased.
Gross potential rental income
$105,000
Insurance and taxes
$9,000
Repairs and maintenance
$15,000
Depreciation
$11,000
What is the building's net operating income (NOI), based on the above table?
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NOI can be calculated as gross rental income minus vacancy losses, insurance and taxes, and repairs and maintenance. Depreciation is not a factor in calculating NOI. NOI for the building is $105,000 – ($105,000 × 5%) - $9,000 - $15,000 = $75,750.
Johnson is considering the purchase of Happy Valley Acres, a 300-unit apartment complex. She has hired Carson, CFA, to advise her on the investment. Carson has estimated the following data for Happy Valley’s next accounting period:
The property’s net operating income (NOI) and value should be closest to:
| NOI | Value |
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NOI = rental income × (1 ? vacancy rate) ? insurance costs ? property taxes ? utility expense ? repair costs
NOI = $3.80 million × (96.5%) ? 250,000 ? 400,000 ? 120,000 ? 200,000 = 2.70 million
Value of building = 2.70 million / 0.08 = 33.75 million
The portfolio manager of a large real estate investment trust (REIT) has identified an office building as a potential investment. Based upon the following data, what is its net operating income (NOI)?
Gross potential rental income
$235,000
Estimated vacancy and collection loss rate
6%
Insurance and taxes
$15,000
Repairs and maintenance
$17,000
Utilities
$12,500
Cost of equity
11%
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The NOI is $235,000 – ($235,000 × 6%) ? $15,000 ? $17,000 ? $12,500 = $176,400. The cost of equity number is not needed, because the NOI calculation is independent of any financing arrangements.
Net operating income (NOI) is calculated by subtracting which of the following from the property's gross potential rental income?
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NOI does not consider income taxes, financing charges, or depreciation.
The income approach to valuing real estate is most similar to the following method of valuing common stock?
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The income approach for valuing real estate uses the following formula: Appraised Pricereal estate = annual net operating income (NOI) / Market Capitalization Rate (R) The dividend discount model (DMM) with zero growth approach for valuing common stock uses the following formula: Pricecommon stock = Dividend (D) / (Required Rate of Return on the Stock (k) - Growth (g)) When g = 0, the formulas simplify to: Appraised Pricereal estate = NOI / R Pricecommon stock = D / k or, a period cash flow divided by a rate of return. The DMM with normal growth would not be a correct response because the income approach for real estate assumes a constant (no growth) NOI stream to perpetuity.
Based upon the following information, what is the net operating income (NOI) of the property?
Estimated Market Value $600,000 Capitalization Rate 20% Taxes $27,000 Operating Expenses $107,000
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MV = NOI / CAP To solve for NOI, rewrite the formula as: MV × CAP = NOI 600,000 × 0.2 = 120,000
Jill Booton is evaluating an apartment building as a possible investment to add to her portfolio. She has been told that real estate is a good addition to a portfolio for diversification purposes. Jill will not be able to handle the maintenance issues at the complex and thus must hire a full-time maintenance employee at $35,000 per year. She will also hire a full-time manager at $40,000 per year. Property taxes are expected to be $75,000 per year and insurance will be another $25,000. If fully occupied, the gross rental income from the property will be $850,000. Due to the location of the building, Jill estimates a very low vacancy rate of 3.5 percent annually. The net operating income of the property is closest to:
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NOI = $850,000 – ($850,000 x 0.035) – $35,000 – $40,000 – $25,000 – $75,000 = $645,250.
A property has a gross potential rental income of $740,000. Operating expenses, excluding insurance and property taxes, amount to 30% of gross rents. Insurance and property taxes total $16,800. If the market capitalization rate is 22%, the value of this property is closest to:
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Appraised Price = NOI / CAP = [(0.7 × 740,000) ? 16,800] / 0.22 = 2,278,182
John Williams wants to purchase an apartment complex. The complex consists of 75 units each renting for $700 per month. The estimated vacancy and collection loss rate is 7%. The insurance for the building is $40,000 annually and taxes are $22,000 annually. Utilities are $18,000 and the maintenance expense is $29,000.
Assume a market cap rate of 11%. Recent sales of nearby apartment complexes have resulted in the following information.
Characteristics Units Slope Coefficient in $ per Unit Proximity to downtown Miles -350,000 Proximity to
public transportationBlocks -500 Building size Units +75,000
Williams' proposed apartment complex is 4 miles away from downtown and 6 blocks away from the nearest public transportation.
What is the net operating income (NOI) for Williams' proposed apartment complex?
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NOI = (75)(700)(12)(0.93) – $40,000 ? $22,000 ? $18,000 ? $29,000 = $476,900.
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Value = (-350,000)(4) + (-500)(6) + (75,000)(75) = 4,222,000
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Appraisal price = NOI / market cap rate = $476,900 / 0.11 = $4,335,454.55
An investor with a large real estate portfolio must estimate the value of his holdings at year-end. Given the following data for an apartment building in the portfolio, estimate the appraised value using the income approach:
NOI
$165,000
Marginal tax rate
28%
Market cap rate
9%
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Appraisal price = NOI / Market cap rate = $165,000 / 0.09 = $1,833,333. Remember that all calculations for the income approach are made pre-tax.
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