You are considering investing in a 150 unit apartment but you have the opportunity

You are considering investing in a 150 unit apartment but you have the opportunity to convert it to a condominium. The following are the financialconsiderations: Apartment Number of Units 150 Average Monthly Rent $1,650 Vacancy & Credit Loss 8.00% Monthly Expenses $600 Income Growth 3.00% Expense Growth 2.00% Cap Rate 8.50% Condo Conversion Average Sales Price Per Unit $250,000 Renovation/Conversation Cost $50,000 Annual Holding Cost Per Unit of Remaining Units $5,000 Sales Commission/Closing Cost Per Unit 8.00% Annual Absorption 50 Renovation Cost Increase 5.00% Annual Price Increase 10.00% Preliminary Engineering/Design/Legal, etc $250,000 Discount Rate 20.0% Which should you choose to do? Why?

 

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