ABC Residential Investors, LLP, is considering the purchase of a 120-unit apartment complex in Steel City, Pennsylvania. A market study of the area reveals that an average rental of $624 per month per unit could be realized in the appropriate market area. During the last six months, two very comparable apartment complexes have been sold in the same market area. The Oaks, a 140-unit project, sold for $9 million. Its rental schedule indicates that the average rent per unit is $598 per month. Palms, a 90-unit complex, is presently renting units at $698 per month, and its selling price was $6.6 million. The mix of number of bedrooms and sizes of units for both complexes is very similar to that of the subject property, and both appear to have normal vacancy rates of about 10 percent annually. All rents are net as tenants pay all utilities and expenses. Required: a. Based on the data provided here, how would an appraiser establish an estimate of value? (Round intermediate calculations and final answers to the nearest dollar amount.) Comparable The Oaks Palms Estimated Value b. What other information would be desirable in reaching a conclusion about the probable value for the property? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Expense ratios Financing Expected trends in rents Property values Risk
ABC Residential Investors, LLP, is considering the purchase of a 120-unit apartment complex in Steel City, Pennsylvania. A market study of the area reveals that an average rental of $624 per month per unit could be realized in the appropriate market area. During the last six months, two very comparable apartment complexes have been sold in the same market area. The Oaks, a 140-unit project, sold for $9 million. Its rental schedule indicates that the average rent per unit is $598 per month. Palms, a 90-unit complex, is presently renting units at $698 per month, and its selling price was $6.6 million. The mix of number of bedrooms and sizes of units for both complexes is very similar to that of the subject property, and both appear to have normal vacancy rates of about 10 percent annually. All rents are net as tenants pay all utilities and expenses. Required: a. Based on the data provided here, how would an appraiser establish an estimate of value? (Round intermediate calculations and final answers to the nearest dollar amount.) Comparable The Oaks Palms Estimated Value b. What other information would be desirable in reaching a conclusion about the probable value for the property? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Expense ratios Financing Expected trends in rents Property values Risk
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:ABC Residential Investors, LLP, is considering the purchase of a 120-unit apartment complex in Steel City, Pennsylvania. A market
study of the area reveals that an average rental of $624 per month per unit could be realized in the appropriate market area. During
the last six months, two very comparable apartment complexes have been sold in the same market area. The Oaks, a 140-unit project,
sold for $9 million. Its rental schedule indicates that the average rent per unit is $598 per month. Palms, a 90-unit complex, is presently
renting units at $698 per month, and its selling price was $6.6 million. The mix of number of bedrooms and sizes of units for both
complexes is very similar to that of the subject property, and both appear to have normal vacancy rates of about 10 percent annually.
All rents are net as tenants pay all utilities and expenses.
Required:
a. Based on the data provided here, how would an appraiser establish an estimate of value? (Round intermediate calculations and
final answers to the nearest dollar amount.)
Comparable
The Oaks
Palms
Estimated Value
b. What other information would be desirable in reaching a conclusion about the probable value for the property? (You may select
more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click
the box with the question mark to empty the box for a wrong answer.)
Expense ratios
Financing
Expected trends in rents
Property values
Risk
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