Reference no: EM133159526

Question - A commercial property consists of 9 office suites, 4 on the first floor and 5 on the second. Monthly contract rents: 6 suites at $1,800 per month and 3 at $1,400 per month.

Annual market rent increases: 3% per year.

Vacancy and collection losses: 10% per year.

Operating expenses: 40% of effective gross income (EGI) each year. Capital expenditures: 5% of effective gross income (EGI) each year. Expected holding period: 5 years.

Selling expenses at the end of year 5: $58,300.

Required - Compute: a) Net operating income (NOI) for each year during the holding period; b) Net sale proceeds (NSP) when the property is sold at the end of the holding period assuming that sale price at the end of holding period is equal to the projected NOI a year after that discounted by the going- out cap rate of 10%.