Determine market value for residential investment property

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Reference no: EM133111198

Three recent sales of rental properties recorded in a similar location, as follows:

Similar property
Annual rentSale price
Rate of return62 Gray Street
22,000280,000
7.86%150 White Avenue
19,000255,000
7.45%33 Black Road
21,000270,000
7.78%

Required:

a. Use the capitalisation approach to determine a market value for a residential investment property that is planned to be rented for a net amount of $20,000 p.a.

b. The capitalisation method can also be used to determine the net rent income that can be demanded from a tenant. Suppose a person paid $290,000 for a rental property in a similar area and required a net rental return (after annual operating expenses of $11,000) of 9% p.a. from the investment. What would be the gross rental income that could be expected?

Reference no: EM133111198

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