Question 4 (BTCF): An investor is considering an office building investment with

Question

Question 4 (BTCF): An investor is considering an office building investment with the following assumptions: ASSUMPTIONS FOR OFFICE BUILDING INVESTMENT Input Assumption Number of units 24 office units at an average of 1,125 square feet per office Asking Price $600,000 Rents $375/month/unit in year 1 ; expected to increase 5% / year V & C Losses 5% of PGI Operating Expenses 30% of EGI Capital Expenditure 10% of EGI Financing Loan - to - value Ratio 80 percent Interest Rate 7 percent Maturity 30 years with monthly payments Holding period 2 years ( to be sold after 2 years) Expected Selling Price NOI of year 3 capitalized at 10% Selling expenses 6 percent of the selling price a. Prepare the before -tax cash flow (BTCF) statement for 2 years b. Calculate the before - tax (BTCF) IRR on this investment

Explanation / Answer

The annual rate of return for your IRA. This calculator assumes that your return is compounded annually and your contributions are made at the beginning of each year. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500

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