Reading 74: Alternative Investments-LOS f 习题精选 net, 2011, comparison, investment, property

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS f: Calculate the net operating income (NOI) from a real estate investment, the value of a property using the sales comparison and income approaches, and the after-tax cash flows, net present value, and yield of a real estate investment.

 

 

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:

A) $3,500,000.

B) $2,500,000.

C) $3,000,000.

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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]

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1215

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 transportation	Blocks	-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?

A) $498,900.

B) $476,900.

C) $436,153.

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NOI = (75)(700)(12)(0.93) – $40,000 ? $22,000 ? $18,000 ? $29,000 = $476,900.

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Using the sales comparison approach, the value of the apartment complex is:

A) $4,060,000.

B) $3,894,500.

C) $4,222,000.

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Value = (-350,000)(4) + (-500)(6) + (75,000)(75) = 4,222,000

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Using the income approach, the value of Williams' apartment complex is:

A) $4,525,455.

B) $4,335,455.

C) $5,727,273.

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Appraisal price = NOI / market cap rate = $476,900 / 0.11 = $4,335,454.55

1215

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%

A) $1,576,667.

B) $1,320,000.

C) $1,833,333.

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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.

1215

The income approach to valuing real estate is most similar to the following method of valuing common stock?

A) Dividend discount model with zero growth.

B) Dividend discount model with normal growth.

C) Price-to-sales ratio.

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The income approach for valuing real estate uses the following formula:

Appraised Price_{real 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:

Price_{common stock} = Dividend (D) / (Required Rate of Return on the Stock (k) - Growth (g))

When g = 0, the formulas simplify to:

Appraised Price_{real estate} = NOI / R

Price_{common 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.

1215

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

A) $120,000.

B) $104,000.

C) $98,600.

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MV = NOI / CAP

To solve for NOI, rewrite the formula as: MV × CAP = NOI

600,000 × 0.2 = 120,000

1215

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:

A) $825,250.

B) $4,963,462.

C) $645,250.

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NOI = $850,000 – ($850,000 x 0.035) – $35,000 – $40,000 – $25,000 – $75,000 = $645,250.

1215

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:

A) $2,278,000.

B) $1,727,000.

C) $2,431,000.

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Appraised Price = NOI / CAP = [(0.7 × 740,000) ? 16,800] / 0.22 = 2,278,182

1215

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:

• Potential rental income = $3.80 million.
• Vacancy rate = 3.5%.
• Insurance costs = $250,000.
• Financing costs = $940,000.
• Property taxes = $400,000.
• Utility expense = $120,000.
• Repair costs = $200,000.
• Depreciation = $350,000.
• Required return = 8%.

The property’s net operating income (NOI) and value should be closest to:

NOI

Value

A) $2.70 million $33.75 million

B) $2.83 million $33.75 million

C) $2.70 million $21.60 million

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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