The potential gross income of the property

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A Local 20,000 square foot retail building is 100% occupied by a single tenant. The lease started last week and continues for 10 years. The rent is $7.00 per square foot per year. The landlord pays all the expenses associated with the building.

The expenses total $2.00 per square foot per year, and we have determined that they are market-oriented. From a market survey, it is our opinion that 5% is a reasonable vacancy allowance and 2% is a reasonable allowance for collection loss.

The market expects a 9% return on investment (overall rate) for investments like this.

1. The potential gross income of the property?

2. The effective gross income of the property?

3. The total expenses are:

4. The net operating income of the property?

5. What is the value of the property using the direct capitalization method of the income capitalization approach?

Reference no: EM131970772

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