My office is in an old building where the owner is moving out and it's up for sale. I'm trying to determine the odds that the next buyer will keep the building and rent it out versus tearing it down and building something new.
If I know the rental income of the property is $x, I know it roughly takes $x to fix it up, to determine the price of the building I need to know the rate of return an investor would need for the building to make it attractive.
So, of real estate investors, what rate of return on cash flow are they generally looking for when they price a building? 10%? 12%? 15%?
The value of the land should appreciate at the overall market rate. This isn't the ghetto and they aren't planning on building a prison next door so we don't have that to worry about that sort of depreciation issue.
If I know the rental income of the property is $x, I know it roughly takes $x to fix it up, to determine the price of the building I need to know the rate of return an investor would need for the building to make it attractive.
So, of real estate investors, what rate of return on cash flow are they generally looking for when they price a building? 10%? 12%? 15%?
The value of the land should appreciate at the overall market rate. This isn't the ghetto and they aren't planning on building a prison next door so we don't have that to worry about that sort of depreciation issue.
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