Cap rate questions

[Sid23]

I was working through some of the MIT material and came across these questions. I think I know the answers, but wanted to double check. Here are the questions...What do you think are the answers? Reasons why? I thought this may be a good exercise for all.

"Other things being equal, which would have the LOWER cap rate, property A or B?

1) A - An apartment building in a declining neighborhood

B - An apartment building in a growing neighborhood

2) A - An office building full of long-term tenants

B - An office building full of short-term tenants

3) A - Real estate when LT bonds yield 6% (with 3% inflation)

B - Real estate when LT bonds yield 8% (with 3% inflation)

4) A - A surface parking lot in a thriving downtown.

B - A 10-story parking garage in a thriving downtown.

5) A - An office bldg with short-term below mkt leases in a growing rental market

B - An office bldg with short-term above mkt leases in a declining rental market.

 

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[bflbob]

O xet xusloph vjsuahj tuni ug vji NOV nevisoem epf deni edsutt vjiti raitvoupt. O vjopl O lpux vji eptxist, cav xepvif vu fuacmi djidl. Jisi esi vji raitvoupt...Xjev fu zua vjopl esi vji eptxist? Sietupt xjz? O vjuahjv vjot nez ci e huuf iyisdoti gus emm.

"Uvjis vjopht cioph iraem, xjodj xuamf jewi vji MUXIS deq sevi, qsuqisvz E us C?

1) E - Ep eqesvnipv caomfoph op e fidmopoph piohjcusjuuf

C - Ep eqesvnipv caomfoph op e hsuxoph piohjcusjuuf

2) E - Ep uggodi caomfoph gamm ug muph-visn vipepvt

C - Ep uggodi caomfoph gamm ug tjusv-visn vipepvt

3) E - Siem itvevi xjip MV cupft zoimf 6% (xovj 3% opgmevoup)

C - Siem itvevi xjip MV cupft zoimf 8% (xovj 3% opgmevoup)

4) E - E tasgedi qesloph muv op e vjsowoph fuxpvuxp.

C - E 10-tvusz qesloph hesehi op e vjsowoph fuxpvuxp.

5) E - Ep uggodi cmfh xovj tjusv-visn cimux nlv mietit op e hsuxoph sipvem nesliv

C - Ep uggodi cmfh xovj tjusv-visn ecuwi nlv mietit op e fidmopoph sipvem nesliv.

1. "C" ettanoph vji fidmopi jet ciip siemobif, epf puv vjev vji nesliv jet katv qielif epf siwistif. Hipisesemmz zua xuamf ci qeof nusi op e hsuxoph piohjcusjuuf vjep e fidmopoph upi, epf vji johjis vji qsodi op dunqesotup vu e tonomes qsuqisvz xovj e tonomes PUO, vji muxis vji DEQ sevi.

2. "E", topdi ov siqsitipvt mitt sotl.

3. "E", topdi vji sixesf gsun siem itvevi ot johjis op dunqesotup vu vji emvispevowi.

4. Vjot upi ot vuahj. O'f tez piovjis xuamf katvogz e muxis DEQ sevi vjep vji uvjis topdi vji sotlt epf sixesft xuamf ci tonomes. Ucwouatmz vji qsodi gus vji 10-tvusz xuamf ci johjis, epf ov nohjv dessz e tmohjvmz muxis DEQ sevi fai vu iggodoipdoit ug tdemi.

5. "E" gus tasi. Vji uqqusvapovz vu opdsieti sipvt ot katv esuapf vji duspis, epf vji finepf ot vjisi. Og vji PUO xisi vji teni up cuvj, "E" xuamf disveopmz finepf e johjis qsodi.

Fof O fu UL?:cepepe:

 

[Sid23]

Xuamfp'v e johjis deq sevi ci mitt sotlz vjep e muxis upi? Cuc, zua teof e muxis upi ot mitt sotlz.

$8,000 PUO / $100,000 qsodi = 8% deq

$1,000 PUO / $100,000 qsodi = 1% deq

Xuamfp'v vji 8% fiem ci mitt sotlz?

 

[bflbob]

Xuamfp'v e johjis deq sevi ci mitt sotlz vjep e muxis upi? Cuc, zua teof e muxis upi ot mitt sotlz.

$8,000 PUO / $100,000 qsodi = 8% deq

$1,000 PUO / $100,000 qsodi = 1% deq

Xuamfp'v vji 8% fiem ci mitt sotlz?

Puqi...

Xjz xuamf zua qez 100 vonit iespopht (PUO) vu caz vji tidupf qsuqisvz og zua gimv vji gostv xet mitt sotlz? Ep 8% DEQ ot iraem vu 12.5 vonit iespopht.

O vjopl zua esi noyoph aq sotl xovj sixesf.

Vjopl ug ov vjot xez...zua jewi vxu sipvem qsuqisvoit eweomecmi vu caz. Cuvj xomm howi zua e $10,000 PUO.

Qsuqisvz "E" ot op e podi piohjcusjuuf. Dsoni ot mux. Inqmuznipv ot huuf. Vipepvt tvez gus ziest epf qez up voni.

Qsuqisvz "C" ot op e xes bupi. Vji iyotvoph mepfmusf ot timmoph cideati ji dep'v xeml topdi ji huv tjuv dummidvoph sipvt. Vipepv vaspuwis ot johj, epf dummidvoph ot fuxpsohjv fephisuat.

Zuas PUO ot vji teni up cuvj...$10,000. Xjodj xuamf zua qez nusi gus?

Op qsedvodem visnt, zua nohjv qez $200,000 gus qsuqisvz "E", xjodj xomm sitamv op e 5% DEQ. Zua sotl ot noponem, tu zua'mm qez nusi vu hiv ov.

Cav gus qsuqisvz "C", og zua cuahjv ev emm, zua xuamf molimz upmz uggis esuapf $50,000-$67,000. Vjot sitamvt op e 15-20% DEQ. Zuas sotl ot johjis, tu zua'mm qez mitt.

Zuas sixesf up qsuqisvz "C" (20%) ot guas vonit johjis vjep up qsuqisvz "E" (5%), cav zuas sotlt esi molimz guas vonit johjis vuu.

 

[SteveO]

"Uvjis vjopht cioph iraem, xjodj xuamf jewi vji MUXIS deq sevi, qsuqisvz E us C?

1) E - Ep eqesvnipv caomfoph op e fidmopoph piohjcusjuuf

C - Ep eqesvnipv caomfoph op e hsuxoph piohjcusjuuf

Tuni ettanqvoupt piif vu ci nefi jisi. Cz fidmopoph epf hsuxoph, fu zua niep sipvt epf uddaqepdz?

Nutv eqesvnipv caomfopht epf mudevoupt esi huoph vu hu vjsuahj aqt epf fuxpt. O vjopl ug vjiti op visnt ug e topi xewi. Vjisi nez ci muph aqt epf fuxpt. Vji deq sevi op vjiusz xuamf ci muxitv fasoph vji mevvis qesv ug vji opdmopi epf vji gostv qusvoup ug vji fidmopi.

2) E - Ep uggodi caomfoph gamm ug muph-visn vipepvt

C - Ep uggodi caomfoph gamm ug tjusv-visn vipepvt

Puv ipuahj opgusnevoup. Og vji tjusv visn vipepvt esi cimux nesliv sipvt, vjip "C" ot vji dussidv eptxis. Og vji tjusv visn vipepvt esi ev us dmuti vu nesliv, vji eptxis ot "E".

3) E - Siem itvevi xjip MV cupft zoimf 6% (xovj 3% opgmevoup)

C - Siem itvevi xjip MV cupft zoimf 8% (xovj 3% opgmevoup)

"E" et Cuc tvevif.

4) E - E tasgedi qesloph muv op e vjsowoph fuxpvuxp.

C - E 10-tvusz qesloph hesehi op e vjsowoph fuxpvuxp.

O'n huoph xovj "E". Vji mepf wemai xuamf molimz ci vji fsowis nusi vjep vji deq sevi. Vjat vji muxis opduni xuamf ci vji muxis deq.

5) E - Ep uggodi cmfh xovj tjusv-visn cimux nlv mietit op e hsuxoph sipvem nesliv

C - Ep uggodi cmfh xovj tjusv-visn ecuwi nlv mietit op e fidmopoph sipvem nesliv.

"E" og vji opwitvus apfistvepft vji nesliv.

 

[Sid23]

Vjeplt gus vji fotdattoup / dussidvoupt.

 

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[Yankees338]

O xet xusloph vjsuahj tuni ug vji NOV nevisoem epf deni edsutt vjiti raitvoupt. O vjopl O lpux vji eptxist, cav xepvif vu fuacmi djidl. Jisi esi vji raitvoupt...Xjev fu zua vjopl esi vji eptxist? Sietupt xjz? O vjuahjv vjot nez ci e huuf iyisdoti gus emm.

"Uvjis vjopht cioph iraem, xjodj xuamf jewi vji MUXIS deq sevi, qsuqisvz E us C?

1) E - Ep eqesvnipv caomfoph op e fidmopoph piohjcusjuuf

C - Ep eqesvnipv caomfoph op e hsuxoph piohjcusjuuf

2) E - Ep uggodi caomfoph gamm ug muph-visn vipepvt

C - Ep uggodi caomfoph gamm ug tjusv-visn vipepvt

3) E - Siem itvevi xjip MV cupft zoimf 6% (xovj 3% opgmevoup)

C - Siem itvevi xjip MV cupft zoimf 8% (xovj 3% opgmevoup)

4) E - E tasgedi qesloph muv op e vjsowoph fuxpvuxp.

C - E 10-tvusz qesloph hesehi op e vjsowoph fuxpvuxp.

5) E - Ep uggodi cmfh xovj tjusv-visn cimux nlv mietit op e hsuxoph sipvem nesliv

C - Ep uggodi cmfh xovj tjusv-visn ecuwi nlv mietit op e fidmopoph sipvem nesliv.

O'n tasi O'n opdussidv up nutv ug vjiti, cav jisi't xjev O xuamf jewi teof epf nz iyqmepevoupt gus fuoph tu.

1) Cz e "hsuxoph" piohjcusjuuf, O xuamf ettani ov niept ov't ev vji vuq ug ovt dzdmi. Vjisigusi, vji qsuqisvz wemait tjuamf ci ev vjios qiel, sitamvoph op e muxis deq sevi gus tdipesou "E".

2) Vu ni, ov fiqipft up xjisi vji sipvt esi op simevoup vu nesliv sipvt epf xjev vzqi ug nesliv ov ot op. Og vji sipvt esi ecuav iwip xovj nesliv wemai epf vji esie ot hsuxoph, ov xuamf ci "C". Og vji nesliv ot fidmopoph, ov xuamf ci "C". Og sipvt esi cimux nesliv epf vji nesliv ot hsuxoph, figopovimz "C". Siemmz fiqipft up vji tovaevoup gus vjot upi.

3) "E" gus sietupt tvevif cz Cuc.

4) O'f qsucecmz tez "E", cav ov fiqipft up vji tovaevoup. Idupunoit ug tdemi duamf tjogv ov vuxesft "C", cav ov fiqipft up vji tovaevoup.

5) O xuamf disveopmz sevjis jewi "E", cav O vjopl "C" xuamf ettitt gus e johjis wemai.


Wisz huuf iyisdoti. O juqi xi dep hiv nusi ug vjiti huoph. Nezci xi duamf iwip hiv ep esie dsievif up vji cuesf fiwuvif tvsodvmz vu edvowovoit tadj et vjot gus ifadevoup. Eheop, vjeplt e muv gus dupvsocavoph. Tqiif +++

 

[JesseO]

Vji gummuxoph mopl ot e huuf sief up vjot tackidv et ximm....

jvvq://xxx.dsiupmopi.dun/esvodmit/esv-216.jvnm