Evaluating an income producing property

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Reference no: EM131872056

Consider an investor with a 7 year investment horizon, evaluating an income producing property. The property may currently be purchased for $1,800,000. Last year’s NOI of $160,000 is projected to grow at 4% annually into the foreseeable future. The reinvestment rate is 10%. At the end of the investor’s holding period, cap rates are expected to 9% on properties of this nature.

1) What is the total return offered by this investment?

2) Decompose the expected return on our 7 year investment property.

Reference no: EM131872056

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