You have been offered a block of ten flats which has been just completed. The price is $2.0 million ($600000 for land and $1.4m for the building). The local estate agent advises that you can expect gross rent at $2000/month/flat, and an average occupancy rate of 95%. You would like at least 8.0% per annum before tax. The analysis period is 20 years, with an estimated property sale value of $2.71m (net of sales expenses) at that time. The outgoings are as follows: Analyse the investment cost or benefit of this property, and advice on the Net Present Value and the Internal Rate of Return. Discuss and comment on these results.
