A 4-unit apartment building in Sacramento has monthly rents of $1,500 per unit. The submarket vacancy rate is 5%. Annual operating expenses are $28,800. The prevailing cap rate for comparable properties is 6%. Using the income approach (direct capitalization), what is the estimated value of the property?
Correct Answer
C) $660,000
PGI $72,000 × 0.95 = EGI $68,400; NOI = $68,400 − $28,800 = $39,600; Value = $39,600 ÷ 0.06 = $660,000.
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In the cost approach, a California appraiser must distinguish between direct costs and indirect costs of construction. Which of the following is an example of an INDIRECT cost in California construction?
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A California investor is using the Gross Rent Multiplier (GRM) to estimate the value of a duplex in Long Beach. The duplex generates $4,200 per month in total rent. Three comparable sales in the Long Beach market show GRMs of 16.5, 17.0, and 17.5. Using the average GRM, what is the estimated value?