An Apartment Complex Has 100 Units of Which on Average

An apartment complex has 100 units of which on average 5 are vacant at any given time. Per unit, the rent is $1000 per month, and the operating expenses paid by the landlord including realistic capital reserve) average $5000 per occupied unit) per year. Both rents and expenses are expected to grow at 1 percent per year in perpetuity, and the building value is expected to remain a constant multiple of its net income.
a) What is the projected potential gross income PGI) for the property in the first year?
b) What is the projected effective gross income EGI) for the property in the first year?
c) What is the projected net operating income NOI) for the property in the first year?
d) Suppose historically properties like this have averaged total returns of 10% per year when T-bills have averaged returns of 7%. If T-bills are currently yielding 5%, what is the NPV of a deal to purchase this property for $7,000,000?

Correct Answer:

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PGI = 100*1000*12 = $1,200,000.EGI = 95*...

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