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CHAPTER FOURTEEN

CHAPTER FOURTEEN. DISPOSITION AND RENOVATION OF INCOME PROPERTIES. Chapter Objectives. Criteria by investors to determine whether a property should be sold or held IRR for holding vs. selling MRR Incremental cost of refinancing Renovation and the IRR. Disposition Decisions.

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CHAPTER FOURTEEN

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  1. CHAPTER FOURTEEN DISPOSITION AND RENOVATION OF INCOME PROPERTIES

  2. Chapter Objectives • Criteria by investors to determine whether a property should be sold or held • IRR for holding vs. selling • MRR • Incremental cost of refinancing • Renovation and the IRR

  3. Disposition Decisions • Anticipated holding period • Periodically evaluate disposition • Equity buildup • Opportunity cost of not selling

  4. Cash Flow Summary-Assuming Sale

  5. ATCF From Sale After Five Addition Years

  6. Marginal Rate of Return • The return that would result from holding property one additional year MRR=ATCFs(yr t+1) + ATCF0(yr t+1)- ATCFs(yr t) ATCFs(yr t) • Property should be sold when the MRR falls below the rate at which funds can be reinvested

  7. Refinancing as an Alternative

  8. Renovation as an Alternative

  9. Rehabilitation Investment to Tax Credit

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