Summary Exam 1 2023/2024

Summary Exam 1 2023/2024 Kevin is preparing a Comparative Market Analysis (CMA) on a commercial net leased office property that has 100% occupancy and income of $67,000, with expenses of $22,000 and a management fee of 5% of the gross income. The property is assessed by the municipality at $425,000. If Kevin considers a 9% rate of return to be reasonable for this income property, what would Kevin recommend as a listing price? 1. $500,000 2. $597,000 3. $744,444 4. $462,778 - ANSWER-4. $462,778 - $67,000 - $22,000 - $3,350 (5% management fee) = $41,650 / 09 = $462,778 NOI (effective gross income - operating expenses) /cap rate = sales price $41,650/ .09 = $462,778 Scenario A John and Mary Apton list their home for $152,000. There is an appurtenant easement to access a large lake which is deeded. A coal fired power plant is slated to open 5 miles from the property next year. An Environmental Impact Statement is due on March 7. Agent Pacheco presents an offer to the Aptons. It is a land contract for $142,000 with an 8% interest rate due and payable in 10 years. It is accepted. The offer is contingent on the environmental impact results. Closing is scheduled for June 1. Taxes are $3040, the commission is 6.5%, (buyer's agent commission is 2.8%), taxes and insurance are $675, recording fee is $25 The environmental impact statement showed the value of the property would not be impacted. Use a banker's calendar. Seller is responsible for the day of closing.