Property Resale PriceTypically, the property resale price or market value is calculated using the income capitalization approach. According to this approach, a property’s market value and resale price in the last period of the investment analysis n, PRPn, is equal to the ratio of the Net Operating Income (NOIn) expected to be produced by the property in that period over the market capitalization rate expected to be prevailing in that period: Property Resale Pricen = NOIn/ Capitalization Raten (25) Please see Formula (4) and its discussion for further information on how exactly NOI is calculated. In calculating the NOI, in the case of multi-tenant buildings, the Rental Income, RI, in the first period of analysis is calculated as the sum of the rental income received from each tenant, according to the terms of the signed lease contracts with each of them. Note that the rental rate is typically quoted in $ per square meter per month. Given that the contract rate for each tenant is likely different, the formula for calculating the annual rental income for a property with i tenants at the time of analysis t is given by (26): Rental Incomet = A1* R1t*12 + A2*R2t*12 +….+Ai*Rit*12 (26) Where Ai = Area (in square meters or square feet) leased by last Tenant I Read the continuation of this discussion in the e-book Real Estate Investment Mathematics.
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