PpD Midterm Book

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PpD Midterm Book
2012-03-07 18:38:47
REal Estate

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  1. Potential Gross income
    Total annual rental income property would produce ASSUMING 100 occupancy and no collection loss
  2. Direct Capitalization
    dividing one yr stabilized NOI by a cap rate

    Value= NOI/CAP rate
  3. 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
  4. 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
  5. What is Discounted Cash Flow Analysis
    • 1.Estimate future cash flows
    • 2.estimate net cahs flow from selling propert at end of holding period
    • 3.appropriate requrield total rate of return

    using these inpust generate value of properte