Your firm plans on purchasing an existing rental property with a remaining service life of 30 years. Recently, the tenan
Posted: Sun May 29, 2022 8:22 pm
Your firm plans on purchasing an existing rental property with a
remaining service life of
30 years. Recently, the tenants signed a 5-year lease, fixing the
rental income at $300,000 for the next
five years. Rental income is expected to increase by 5% every five
years over the remaining life of the
property. Based on this increase, the annual rental income would be
$315,000 for years 6 through 10,
$330,750 for years 11 through 15, $347,288 for years 16 through 20,
$364,652 for years 21 through 25,
and $382,884 for years 26 through 30. Operating expenses, including
income taxes, are estimated be
$70,000 for the first year increasing by $6,000 each year
thereafter. At the end of the property service
life, you expect selling the lot on which it stands for net amount
of $550,000. Alternatively, you could
invest in a mutual fund that earns at the rate of 10% per annum,
what would be the maximum amount
you would be willing to pay for the property at the present
time?
remaining service life of
30 years. Recently, the tenants signed a 5-year lease, fixing the
rental income at $300,000 for the next
five years. Rental income is expected to increase by 5% every five
years over the remaining life of the
property. Based on this increase, the annual rental income would be
$315,000 for years 6 through 10,
$330,750 for years 11 through 15, $347,288 for years 16 through 20,
$364,652 for years 21 through 25,
and $382,884 for years 26 through 30. Operating expenses, including
income taxes, are estimated be
$70,000 for the first year increasing by $6,000 each year
thereafter. At the end of the property service
life, you expect selling the lot on which it stands for net amount
of $550,000. Alternatively, you could
invest in a mutual fund that earns at the rate of 10% per annum,
what would be the maximum amount
you would be willing to pay for the property at the present
time?