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Direct Capitalization

Chapter 22. Direct Capitalization. Capitalization Rates The ratio of the sale price to the expected net income for the next year May be extracted from comparable sales Other methods can be used to support capitalization rate Estimating the Overall Capitalization Rate

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Direct Capitalization

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  1. Chapter 22 Direct Capitalization

  2. Capitalization Rates • The ratio of the sale price to the expected net income for the next year • May be extracted from comparable sales • Other methods can be used to support capitalization rate • Estimating the Overall Capitalization Rate • Extraction from the market • RO = NIR/EGIM Chapter 22

  3. Band of Investment—Mortgage and Equity Chapter 22

  4. Band of Investment—Land and Building Chapter 22

  5. Debt Coverage Formula Chapter 22

  6. Residual Techniques Chapter 22

  7. Gross Income Multipliers • Conditions • Buyers think this way • Similar expense ratios • Similar upside potential • Estimation of Gross Rent Multipliers Chapter 22

  8. Table 22.1 Sales and Rent Comparable Worksheet Chapter 22

  9. Problems • Suggested solutions begin on page 365. Chapter 22

  10. Problems 1 and 3 Chapter 22

  11. Problems 5D and 6B Chapter 22

  12. Problems 7A, 8A, and 9 Chapter 22

  13. Problem 10 Chapter 22

  14. Problem 10 Chapter 22

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