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CHAPTER FOURTEEN. DISPOSITION AND RENOVATION OF INCOME PROPERTIES. Chapter Objectives. Criteria by investors to determine whether a property should be sold or held IRR for holding vs. selling MRR Incremental cost of refinancing Renovation and the IRR. Disposition Decisions.
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CHAPTER FOURTEEN DISPOSITION AND RENOVATION OF INCOME PROPERTIES
Chapter Objectives • Criteria by investors to determine whether a property should be sold or held • IRR for holding vs. selling • MRR • Incremental cost of refinancing • Renovation and the IRR
Disposition Decisions • Anticipated holding period • Periodically evaluate disposition • Equity buildup • Opportunity cost of not selling
Marginal Rate of Return • The return that would result from holding property one additional year MRR=ATCFs(yr t+1) + ATCF0(yr t+1)- ATCFs(yr t) ATCFs(yr t) • Property should be sold when the MRR falls below the rate at which funds can be reinvested