A property is listed for 1,200,000 and has an annual NOI of 115,000 and the capi

Question

A property is listed for 1,200,000 and has an annual NOI of 115,000 and the capitalization rate of 9.58 percent what if the property has an expected annual appreciation of 3 percent selling costs of 4 percent and a five year holding period, what is the before tax IRR for an all cash deal ? A property is listed for 1,200,000 and has an annual NOI of 115,000 and the capitalization rate of 9.58 percent what if the property has an expected annual appreciation of 3 percent selling costs of 4 percent and a five year holding period, what is the before tax IRR for an all cash deal ?

Explanation / Answer

Year   Property Price NOI Yearly income LESS Selling Cost Total Income PV Factor @11.37% PV of cash flows Year 1      1,200,000 9.58%     114,960          114,960            0.90          103,223 Year 2      1,236,000 9.58%     118,409          118,409            0.81            95,466 Year 3      1,273,080 9.58%     121,961          121,961            0.72            88,291 Year 4      1,311,272 9.58%     125,620          125,620            0.65            81,656 Year 5      1,350,611 9.58%     129,388       54,024      1,425,975            0.58          832,282     610,338      1,906,924      1,200,918 So At 11.37% return the NPV is close to 0, Therfore IRR is 11.37%

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