Q3 Your client is considering the purchase of the following investment. A freehold office investment which is being marketed for £250,000. The property is producing a net income of £25,000 pa, receivable annually in arrears for the first 3 years. At the end of the 3rd year there is a rent review to the full market rent at that time. Rental growth is estimated at 5% pa. The current full market rent of the property is estimated to be £45,000 pa. At the end of the 6th year it is expected that the investment can be sold for £350,000. (i) Using a 10% pa target rate of return calculate the Net Present Value of the investment. (ii) Calculate the equated yield on the investment
Q3
Your client is considering the purchase of the following investment.
A freehold office investment which is being marketed for £250,000. The property is producing a net income of £25,000 pa, receivable annually in arrears for the first 3 years. At the end of the 3rd year there is a rent review to the full market rent at that time. Rental growth is estimated at 5% pa. The current full market rent of the property is estimated to be £45,000 pa. At the end of the 6th year it is expected that the investment can be sold for £350,000.
(i) Using a 10% pa target
(ii) Calculate the equated yield on the investment
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