Word problem 100 unit Apartment Complex rightarrow 30 years duration $4 million

Question

Word problem 100 unit Apartment Complex rightarrow 30 years duration $4 million [Land] rightarrow fully recovered after 30 years $5 million [Building] rightarrow salvage value 10% after 30 years $1 million rightarrow Annual Operating & maintenance Cost 5% rightarrow Annual Property Tax & Insurance 10% vacancy rate 1) With 12% MARR. what must be the monthly leasing cost? 2) Turning 3 units into fitness room would decrease vacancy rate by 6%. Is this good investment? Assuming no extra cost for remodeling to fitness room.

Explanation / Answer

Information Given :- Appartment Unit 100 Vacancy rate 10% Land Cost 4 Million fully recovered at end Building 5million Salvage Value 10% 0.5million fully recovered at end Annual Operating Cost 1 million Annual Tax & Insurance 5% Assuming Tax & Insurance in dimnishing value of Building plus land value Life 30 year or 360 Months Depreciation On Building 150000 Calculation of Total Cost Year Land Building Property Value Operating cost Tax & Insurance Total Cost 12% dis PV Of Outflow 0 4000000 5000000 9000000 9000000 1.00 9000000 1 8850000 1000000 450000 1450000 0.893 1294643 2 8700000 1000000 450000 1450000 0.797 1155931 3 8550000 1000000 450000 1450000 0.712 1032081 4 8400000 1000000 450000 1450000 0.636 921501 5 8250000 1000000 450000 1450000 0.567 822769 6 8100000 1000000 450000 1450000 0.507 734615 7 7950000 1000000 450000 1450000 0.452 655906 8 7800000 1000000 450000 1450000 0.404 585631 9 7650000 1000000 450000 1450000 0.361 522885 10 7500000 1000000 450000 1450000 0.322 466861 11 7350000 1000000 450000 1450000 0.287 416840 12 7200000 1000000 450000 1450000 0.257 372179 13 7050000 1000000 450000 1450000 0.229 332303 14 6900000 1000000 450000 1450000 0.205 296699 15 6750000 1000000 450000 1450000 0.183 264910 16 6600000 1000000 450000 1450000 0.163 236526 17 6450000 1000000 450000 1450000 0.146 211184 18 6300000 1000000 450000 1450000 0.130 188557 19 6150000 1000000 450000 1450000 0.116 168355 20 6000000 1000000 450000 1450000 0.104 150317 21 5850000 1000000 450000 1450000 0.093 134211 22 5700000 1000000 450000 1450000 0.083 119832 23 5550000 1000000 450000 1450000 0.074 106993 24 5400000 1000000 450000 1450000 0.066 95529 25 5250000 1000000 450000 1450000 0.059 85294 26 5100000 1000000 450000 1450000 0.053 76155 27 4950000 1000000 450000 1450000 0.047 67996 28 4800000 1000000 450000 1450000 0.042 60710 29 4650000 1000000 450000 1450000 0.037 54206 30 -400000 -500000 4500000 1000000 450000 550000 0.03 18358 Total Out flow 20649977 PV Of Out Flow 20649976.62 Lease Rental Total 2563564 Rate 12% Perunit 28484 Year O/S Amount Interest Principal Balance 0 1 20649977 2477997 85567 20564410 2 20564410 2467729 95835 20468575 3 20468575 2456229 107335 20361240 4 20361240 2443349 120215 20241025 5 20241025 2428923 134641 20106384 6 20106384 2412766 150798 19955586 7 19955586 2394670 168894 19786692 8 19786692 2374403 189161 19597531 9 19597531 2351704 211860 19385671 10 19385671 2326281 237283 19148387 11 19148387 2297806 265758 18882630 12 18882630 2265916 297648 18584982 13 18584982 2230198 333366 18251615 14 18251615 2190194 373370 17878245 15 17878245 2145389 418175 17460071 16 17460071 2095208 468356 16991715 17 16991715 2039006 524558 16467157 18 16467157 1976059 587505 15879652 19 15879652 1905558 658006 15221646 20 15221646 1826597 736967 14484679 21 14484679 1738162 825402 13659277 22 13659277 1639113 924451 12734826 23 12734826 1528179 1035385 11699441 24 11699441 1403933 1159631 10539810 25 10539810 1264777 1298787 9241023 26 9241023 1108923 1454641 7786382 27 7786382 934366 1629198 6157184 28 6157184 738862 1824702 4332482 29 4332482 519898 2043666 2288816 30 2288816 274658 2288906 -90 Answer     1) = Total Lease rental for 90 uint should be 2563564 or per unit will be 28484 as stated above table Answer     2) = Total unit Vacancy Rate Ocupied 100 10% 90 After Fiteness Room 97 9.40% 88 So conversion of 3 fitness room is not a benificiary as it leads to lesser number of Occupied rented due to which Perunit lease rental will have to increase

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