16.3 - 16.3 Estimating Price and Rates of Return Once an...

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Click to edit Master subtitle style 5/2/11 16.3 Estimating Price and Rates of Return Once an investor decides to seriously consider making an offer on a particular property, the three key economic issues are: 1. The offering price 1. The amount of the cash investment 1. The rate of return on the cash investment
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Click to edit Master subtitle style 5/2/11 1. The Offering Price There are three common techniques: Gross Rent Multiplier The Gross Rent Multiplier or GRM is a ratio that is used to estimate the value of income producing properties. The GRM provides a rough estimate of value The formula for gross rent multiplier is:
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Click to edit Master subtitle style 5/2/11 Capitalization Rate Capitalization rate is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value. The rate is calculated in a simple fashion as follows:
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5/2/11 Price per Square Foot As a backup to the Gross Rent Multiplier and
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This note was uploaded on 05/02/2011 for the course FINANCE 9924603 taught by Professor Ssgdbfb during the Spring '11 term at Kyung Hee.

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16.3 - 16.3 Estimating Price and Rates of Return Once an...

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