Lonnie is considering the purchase of a rental property with several units. The property rents for $8,600 a month when all units are occupied. When all units are occupied, additional income from on-sight laundry facilities is expected to be $200 a month. The units are expected to be rented 85% of the year. Additional expenses associated with the property include real estate taxes of $10,000 a year, liability insurance of $3,500 a year, advertising expense of $1,500 a year, maintenance costs of $12,500 a year, depreciation of $20,500 a year, and interest expense on the property loan of $24,000 a year. If Lonnie's required rate of return on the property is 11%, what is the intrinsic value of the property?

$ 347,818

Explanation:

Intrinsic value of property = Net operating income / Capitalisation rate

WHILE

Net operating income = Earning from property - Operating expenses which is related to property

Earning from Property =

($8600+$200)*12*85%

=$8800*12*0.85

=$89,760

Operating expenses;

Property tax $10,000

Insurance $3,500

Advertising expenses $1,500

Maintenance cost $12,500

Interest expenses  $24,00

Total  $51,500

Net operating income =$89,760-$51,500

=$38,260

Net operating income for perpetuity

Intrinsic value = 38260/0.11

=$ 347,818

Therefore  the intrinsic value of the property is $ 347,818

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"