Ch.19-Web Assignment-pg523 - you can attain your investment...

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Chapter 19: Investment Decisions: NPV and IRR Robb Page 20-Apr-2010 FIN 497: Real Estate Principles Professor Clements Explore the Web – page 523. Visit http://www.reiclub.com/ Click on Real Estate Articles under Investor Information, and then click on Commercial. Find the article by Ray Alcorn titled, “What’s it worth—Deriving Your Capitalization Rate?” After reading this article, examine the more than 400 other articles on real estate investment. a. How do you know what an income property is worth? One method is the cap rate. Although Ray Alcorn says, “It is often misused…” this number represents a projected return for one year. But it is important to know all the incidentals of a investment, such as the cash- on-cash return, the correct income and expenses. Most important, as Alcorn points out, “the real question in valuation is that value at which
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Unformatted text preview: you can attain your investment goals. b. How do you know if you pay X amount for a property that you can get the return you desire on your investment? Critical to this is the NOI calculation. Also, looking at comparable sales and, if applicable, applying the income approach method to valuation, are all ways to help determine the type of return on a potential investment. c. Is there some way to calculate the maximum you can pay for an investment and still achieve your investment goals? Try using the derived capitalization rate: which involves knowing the terms of financing available to you and the return you want. Putting it together with the information and approaches outlined above (and in his article) should provide you with a weighted average to the indicated value of an investment property. See attachment. 1...
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This note was uploaded on 04/25/2010 for the course FIN 497 taught by Professor Clements during the Spring '10 term at University of Missouri-Kansas City .

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