RE-160 Lecture Notes - Lecture 30: Earnings Before Interest And Taxes, Capitalization Rate, Operating Expense

• School: Diablo Valley College
• Department: Business Accounting/Management/Marketing/Real Estate
• Course: RE-160
• Professor: Langager

Document Summary

For residential properties it is commonly referred to as gross rent. Similar to direct sales comparison in that the ratio of price to gross income for similar properties will be applicable to the subject property. Apartment sale 1: ,000 - ,000 - 6. 00. Apartment sale 2: ,000 - ,000 - 6. 13. Apartment sale 3: ,000 - ,000 - 5. 96. Apartment sale 4: ,000 - ,000 - 6. 00. Market value estimate = ,000 x 6. 0 = ,000. Weakness: it doesn"t take into account any expense variations between properties that effect net income. Debt service is not considered an operating expense. Similar to direct sales comparison in that the ratio of net operating income to price for similar properties will be applicable to the subject property. Price annual net income cap rate. Apartment sale 1: ,000 - ,000 - 0. 083. Apartment sale 2: ,000 - ,000 - 0. 085. Apartment sale 3: ,000 - ,000 - 0. 083.