3.6 - Real Estate Equity Investment

Question 1

DCF Analysis

Answer 1

V0 = (NOI1 / (1+k)^1) + (NOI2 / (1+k)^2) + ….. + (NSP / (1+k)^i)

K = discount rate ( = RF + liquidity premium + risk premiums)
NSP = Net Sales Price

Question 2

NOI

Answer 2

PGI - Vacancy Loss = Effective Gross Income

EGI - operating expenses = NOI

PGI —> potential gross income (rent if all spaces occupied)
Vacancy Loss —> vacancy loss rate * PGI