An existing gross lease costs $36,000 per year including all specified services and expenses. Comparable identical space has annual base rent $30,000 plus $12,000 tenant-paid expenses, with otherwise identical rights and services. What is the annual cost advantage of the existing lease? This asks for annual benefit only.
Correct Answer
A) $6,000
30000+12000−36000 = 6000. Common errors: reporting the comparable space's total cost instead of the advantage gives $42,000; deducting only the tenant-paid expenses from the gross lease cost gives $24,000; reporting the tenant-paid expenses instead of the advantage gives $12,000.
Why This Is the Correct Answer
30000+12000−36000 = 6000. Common errors: reporting the comparable space's total cost instead of the advantage gives $42,000; deducting only the tenant-paid expenses from the gross lease cost gives $24,000; reporting the tenant-paid expenses instead of the advantage gives $12,000.
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Previous Question
The subject property is an office building in lease-up. In-place NOI is $96,000, and NOI at stabilized occupancy is projected at $120,000. Sales of stabilized office buildings in the market indicate an overall rate of 8%. Remaining rent loss until stabilization is estimated at $70,000, and remaining leasing commissions and tenant improvements at $110,000. What is the indicated as-is value?
Next Question
An appraiser extracted an 8% overall rate from sales of similar properties whose NOI was reported after reserves for replacement. The subject, a four-unit apartment building, has NOI of $39,200 before reserves. Reserves for similar properties are $300 per unit per year. Last year the owner spent $5,200 to replace a boiler, an outlay not reflected in the $39,200. What is the indicated value by direct capitalization?