Consider the table above Assume that the subject property ha

Consider the table above. Assume that the subject property has effective gross income of $53,000 and a NOI of $27,500.

(a) What value would a GIM approach yield (rounded to the nearest $100)?

(b) What value would a cap rate approach yield (rounded to the nearest $100)?

	Comp1	Comp 2	Comp 3
Price	$300,000	$350,000	$375,000
Effectice gross income	50,000	55,000	60,000
% Operating expense	50%	55%	54%
NOI	25,000	30,000	32,500

Solution

Comp1 Comp 2 Comp 3 Price $300,000 $350,000 $375,000 Effectice gross income 53,000 53,000 53,000 % Operating expense NOI 27,500 27,500 27,500 PRICE OF ASSET/EFFECTIVE GROSS INCOME value through GIM APPROACH $5.66 $6.60 $7.08 PRICE OF ASSETS/NOI CAP APPROACH VALUE $10.91 $12.73 $13.64