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What would be recommendation for armed

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Reference no: EM132941811

You are offered a residential commercial property in Almahboola area where the offer price by its seller is KD 3,500,000. You dragged your feet and were able to collect the following information:

  • The annual increase in the building value is 2.5%
  • Current monthly rents of the building are KD 20,000 and are expected to grow by a 2% annually
  • Vacancies are expected to be 5% of rents
  • The overall operating expenses are expected to be 15% of the EGI (EGI = gross income)
  • Based on the above data, your bank offered you the maximum of 35% fully amortizing loan with 5% interest for 14 years

Question 1: Armed with your MSF intellectual education and training, you decided to calculate the IRR of this investment assuming a 5 years holding period, then sell the property. What would be your recommendation?

 

Reference no: EM132941811

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