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Updated almost 6 years ago on . Most recent reply

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Susan Ali
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How to arrive to the offer price using the five steps method?

Susan Ali
Posted

Hi,

I am reading through Ken McElory’s The ABC of real estate investing and trying to apply the five steps property evaluation method to get the property value and price offer, knowing that:

A. The property valuation or purchasing price (Already set by me evaluator for this particular property) is $298000.

B. I have the NOI of 21523

C. And the Capitalization rate of 7.22%

I already got this Capitalization rate (7.22) by dividing the NOI / Purchasing price or C=B/A.
The suggest equation for the price offer goes like this:
Property value and price offer = NOI / Capitalization rate or 

Property value and price offer = B/C

And needless to say, the answer is defiantly A.


I am getting nowhere with changing the order or these variables. So, how can I arrive to the price offer? Am I missing anything? Any alternative method?

Thanks,

Susan

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