单选题 A residential apartment block in New York has 20 apartments of 1000 square foot area each. The monthly rental per apartment is $5000. The vacancy rate is 10% , and average collection losses are 2%. Operating expenses are $10000 per month (fixed expenses not depending on occupancy). The risk free rate and cap rate are 5% and 10% respectively. The value of the property using the NOI approach is closest to:
【正确答案】 B
【答案解析】
The value is $9.38 mil, as calculated here:
Number of Apartments
20
Monthly Rental
5000
Total Monthly Rental
$100000
Total Potential Annual Rent
{{U}}$1200000{{/U}}
Vacancy Rate - 10%
120000
Collection Loss - 2%
21600
Annual Operating Expenses
120000
Total Annual Adjustments & Expenses
{{U}}261600{{/U}}
NOI
{{U}}$938400{{/U}}
Cap Rate
0.1
Market Value
$9384000
The vacancy losses are calculated on gross monthly rental potential. The collection losses are calculated on net rentals after reducing vacancy losses. The cap rate is used to capitalize the NOI and determine the property's value. The risk free rate is not used here.