Total annual rental income property would produce ASSUMING 100 occupancy and no collection loss
Direct Capitalization
dividing one yr stabilized NOI by a cap rate
Value= NOI/CAP rate
How do you find CAP Rates?
Cap rate= first yr NOI/Sale Price
Doesn't estimate cash flows beyond first year bc is assumes tha tinvestor swho purchased comparable properties had done so--their future cash flwo estimates are embedded in teh sale price of each comparabe property
What is the gross income multiplier
GIM= Sale preice/Effective gross incoem
Instaed on using NOI like capitalization, GIM uses effective gross income of subject and comparable properties
Assumes operating expenses between properties is similar, assumes subject and comparable properties are collecting Market rents,
Thus mostly used fo r apartmne tbuilding where there is one yr leases, and less variation in operating expenses
What is Discounted Cash Flow Analysis
1.Estimate future cash flows
2.estimate net cahs flow from selling propert at end of holding period