- 14 -
In applying the income capitalization method to each of the
apartment complexes, the appraisers used the band of investment
technique to ascertain a capitalization rate for each complex;
the band of investment technique ascertains an overall rate of
return by reference to a mortgage constant (or loan component)
and an equity dividend rate (or equity component). Each
complex's total income, expenses, and net operating income for
1991 were:
The Landings Fox Hill Stonehenge
Total income $2,074,746 $1,703,700 $945,215
Total expenses 1,968,850 706,700 407,592
Net operating income 105,896 997,000 537,623
and the appraisers ascertained the following pro forma operating
statements to factor into their analysis under the income
capitalization method:
The Landings Fox Hill Stonehenge
Gross possible rent $2,826,720 $1,860,780 $1,014,060
Less rebates (448,560) (52,380) (37,020)
Gross rents after rebates 2,378,160 1,808,400 977,040
Laundry rental income 39,000 10,400 7,600
Carports rental income 14,400 29,754 13,306
Total income 2,431,560 1,848,554 997,946
Vacancy (356,724) (90,420) (48,852)
Effective gross income 2,074,836 1,758,134 949,094
Less expenses (996,100) (590,700) (351,000)
Net income 1,078,736 1,167,434 598,094
On the basis of market data, the appraisers calculated an
overall rate of return of 10.238 percent for The Landings. The
components of this rate were: (1) A mortgage constant of 7.238
percent, which was based on an 8.5-percent loan with a 25-year
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011