Arizona Christian University Valuate Homes Real Estate Questions

1. How much would you offer for the following homes? Please explain (or show- run a CMA) your work. Please list all the factors that affected your decision (hint: not all factors are financial)?

• 5830 Oakdale Road SE, Mableton, GA 30126
  • Offer Amount: 
  • Factors and Reasoning:
• 10426 W Illini St, Tolleson, AZ 85353
  • Offer Amount:
  • Factors and Reasoning:

2 Choose one of the two homes above. At your offer price, what is the implied Cap Rate?(consider that this purchase is a lease to buy option) Build a (simple) model in Excell showing your assumptions.

• Background to help you solve the problem:
• Example terms for a $100,000 home :
  • Down payment: $2,000 (2% down payment savings held in escrow account for customer to eventually buy the home)
  • Year 1: ($Y1 rent + $222 savings in escrow acct)
  • Year 2: ($Y2 rent + $222 savings in escrow acct)
  • Year 3: ($Y3 rent + $222 savings in escrow acct)
  • 18-month Buyback: $X (fixed at 1.5 yr appreciation rate above offer price)
  • 36-month Buyback: $Y (fixed at 3 yr appreciation rate above offer price)
    • Y2 rent is 2% higher than Y1 rent; Y3 is 2% higher than Y2 
    • We have not provided rent or buyback numbers, because we want you to make those assumptions
• ).