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 Vacancy rate Percent -500 Building size Units +75,000 Williams’ proposed apartment complex is 4 miles away from downtown and has an estimated vacancy rate of 6%. What is the net operating income (NOI) for Williams’ proposed apartment complex? A) $476,900. B) $498,900. C) $436,153. D) $585,900. Using the sales comparison approach, the value of the apartment complex is: A) $4,060,000. B) $4,222,000. C) $3,894,500. D) $4,160,000. Using the income approach, the value of Williams’ apartment complex is: A) $5,727,273. B) $4,525,455. C) $4,335,455. D) $3,965,027. PS: I just figured out the answer. Nevertheless I thought this would be a good practice question if you are interested. I apologize for the inconvenience. I will post the answer soon.
Answers A) $476,900. B) $4,222,000. C) $4,335,455.