Question

A 30 unit apartment building should last 35 years, when it will need to be either replace or undergo major renovation. assume the building's value at 35 years will be 10% of its construction cost. assume it will be sold and that the land's cost will be recovered in full.$3.2m land$4.8m building $850k annual operating and maintenance6% annual property taxes and insurance (% of initial investment)12% vacancy rate(a)if the owner wants a 15% rate of return, what is the required monthly leasing cost for each unit?(b)if turning 2 units into an exercise facility would decrease the vacancy rate by 5%, would that be a good decision

Answer 1

A 30-unit apartment building should last 35 years, when it will need to be either replace or undergo major renovation. Assume the building’s value at 35 years will be 10% of its construction cost. Assume it will be sold, and that the land’s cost will be recovered in full.

$3.2 Million Land

$4.8 Million Building

$850,000 Annual operating and maintenance

6% Annual property taxes and insurance (% of initial investment)

12% Vacancy rate

a. If the owner wants a 15% rate of return, what is the required monthly leasing cost for each unit?

b.

If turning 2 units into an exercise facility would decrease the vacancy rate by 5%, would that be a good decision?