You are looking to purchase a small strip mall that has 14 u…
You are looking to purchase a small strip mall that has 14 units. You expect that it will generate 120,000 in gross rental income each year, but also expect that you will have to pay 25% of that in expenses, and an additional 10% in vacancy losses. Based on a market study, you think that there is a lack of supply in the market, and project a growth of 6% in NOI over your 3 year investment horizon. The going-in cap rate on this type of property is currently 8%. Finally, because there is a shortage of supply, you expect the property will appreciate by 10% per year over the next three years when you expect to sell it.
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