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You come across an old warehouse property for sale and want to determine whether it’s a good investment

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You come across an old warehouse property for sale and want to determine whether it’s a good investment. The asking price is $1.4 million but you think it will need another $250,000 in improvements to make it competitive.

After careful analysis you determine that the stabilized Net Operating Income for the property (once renovated) will be $170,000 per year. Your research reveals that the market capitalization rate for this type of property (also after renovation) is 8.50%.

(a). Find the Simple Profit (Net Present Value) for this investment by creating a complete Direct Capitalization Analysis (as seen in lecture) in Microsoft Excel.Among other items, be sure to include:

• Market Net Income Multiplier
• Stabilized Value
• Total Project Cost
• Simple Profit (Net Present Value)

(b). Calculate the Project Return Metrics (as shown in lecture) in Excel , be sure to include the Project Capitalization Rate and Project Net Income Multiplier.