Tiêu đề Copy of Case Studies solved 241223docx.pptx ✅

COMPILED BY DR.RAIWINDER SINGH BANSAL
Highest and Best Use Example: 1 Example 1 : Consider an old 1920s brick building in the central business area of a small city. Business and residents moved away from the area, and its current use as retail space may no longer be the highest and best use of the property. It is a 15,000 square foot building, and its estimated value as vacant land is Rs.10/sq. ft., or Rs.150,000. In its current use as retail space, the property generates rent of Rs.12/sq. ft. Vacancy rates are around 11% since foot traffic generally doesn’t support retail business in the area. Operating costs are Rs.34,000 per year. Since conditions are fairly stable, capitalizing next year’s income at a rate of 9% yields an estimated property value of Rs.1,402,222.
Potential Gross Income 2 Rs.1,80,000 Vacancy (11%) Rs.19,800 Effective Gross Income Rs.1,60,200 Operating Expenses Rs.34,000/ Net Operating Income Rs.1,26,200 Capitalised Value 1,26,200×100/9 =Rs.14,02.222/ Another alternative would be to renovate the property and convert it into office space. Market research indicates this is a desirable area for professional office such as attorneys, accountants, architects, and designers. Market rent for offices in this area is Rs.21 per square foot and has been increasing by 2% annually. Operating costs average Rs.5/sqft and increase by Rs.0.25 per year. Converting the property into office space will cost Rs.8,50,000 in the first year, and average vacancy during the year will be 75% due to the time of the renovations. Vacancy is 20% in year 2 and then settles into a constant 5% thereafter.
Year 1 Year 2 Year 3 3 Year 4 Year 5 Year 6 Potential Gross Income 15000× 21 = Rs.3,15,000 315000× 1.02 = Rs.3,21,300 321300× 1.02 = Rs.3,27,726 327726× 1.02 = Rs.3,34,281 334281× 1.02 = Rs.3,40,966 340966× 1.02 = Rs.3,47,785 Vacancy 0.75 × 315000 = Rs,2,36,250 321300× 0.20 = Rs.64,260 327726× 0.05 Rs.16,386 334281× 0.05 = Rs.16,714 340966× 0.05 = Rs.17,048 347785× 0.05 = Rs.17,389 Effective Gross Income Rs.78,750 Rs.2,57,040 Rs.3,11,340 Rs.3,17,566 Rs.3,23,918 Rs.3,30,396 Operating Expenses 5 × 15000 = Rs.75,000 5.25 × 15000 = Rs.78,750 5,50 × 15000 = Rs.82,500 5.75 × 15000 = Rs.86,250 6.00 × 15000 = Rs.90,000 6,25 × 15000 = Rs.93,750 Capital Improvements Rs.8,50,000 Net Operating Income -Rs.8,46,250 Rs.1,78,290 Rs.2,28,840 Rs.2,31.316 Rs.2,33,918 Rs.2,36,646