Types of loans important

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Reference no: EM133056107

You are a real estate valuer for Bank of Almost Anything Go-forward.

You are valuing an apartment complex in New Zealand,that your client wishes to purchase. They have provided you with the following details:

Rental income for 2022 is expected to be $5,000,000 if all apartments are occupied. The vacancy rate is expected to be 35% if the economy goes into recession or 1% if the economy grows. The probability of a growing economy is 80% . Expenses per year include government land taxes ($185,000), insurance ($105,000) maintenance ($320,000) and a compulsory foreign ownership property levy tax ($95,000). Assume that only the revenue stream varies with the type of economy faced.

- Use the capitalisation of net income method to find the expected value of this apartment complex if the discount rate of your client is 5%.

- Explain the nature of a real estate loan, are they safe and why are these types of loans important?

Reference no: EM133056107

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