Property 2

NOI: 1,411,200

Capitalization of building:7%

Property value: 16,464,000

Floor Area: 980

Interest rate of land: 7%

Land Area: 980

Property 3

NOI: 1,800,000

Capitalization of building: 7%

Property value: 25,800,000

Floor Area: 1500

Interest rate of land: 6%

Land Area:1500

calculate building rent and land rent

To calculate the building rent and land rent for both properties, we can use the following approach:

### 1. Building Rent Calculation
Building Rent can be derived using the formula:
\[
\text{Building Rent} = \text{Capitalization Rate of Building} \times \text{Property Value}
\]

### 2. Land Rent Calculation
Land Rent can be derived using the formula:
\[
\text{Land Rent} = \text{Interest Rate of Land} \times \text{Land Value}
\]

However, we need to determine the land value first. Assuming the property value is a combination of the land value and the building value, we can use the Net Operating Income (NOI) to estimate the total property value as the sum of both the land value and building value. The formula is:

\[
\text{Property Value} = \text{NOI} \times \frac{1}{\text{Capitalization Rate of Building}}
\]

The land value would then be the difference between the property value and the building value:
\[
\text{Land Value} = \text{Property Value} - \text{Building Value}
\]

Let's apply this to both properties.

### **Property 2**
- **NOI**: \$1,411,200
- **Capitalization Rate of Building**: 7%
- **Property Value**: \$16,464,000
- **Floor Area**: 980
- **Interest Rate of Land**: 7%
- **Land Area**: 980

1. **Building Rent Calculation**:
   \[
   \text{Building Rent} = 0.07 \times \$16,464,000 = \$1,152,480
   \]

2. **Land Value Calculation**:
   Since the building rent formula assumes that the property value is entirely based on the building value:
   \[
   \text{Land Value} = \text{Property Value} - \text{Building Value} = \$16,464,000 - \$16,464,000 = 0
   \]
   Hence:
   \[
   \text{Land Rent} = 0
   \]

### **Property 3**
- **NOI**: \$1,800,000
- **Capitalization Rate of Building**: 7%
- **Property Value**: \$25,800,000
- **Floor Area**: 1500
- **Interest Rate of Land**: 6%
- **Land Area**: 1500

1. **Building Rent Calculation**:
   \[
   \text{Building Rent} = 0.07 \times \$25,800,000 = \$1,806,000
   \]

2. **Land Value Calculation**:
   Similarly:
   \[
   \text{Land Value} = \text{Property Value} - \text{Building Value} = \$25,800,000 - \$25,800,000 = 0
   \]
   Hence:
   \[
   \text{Land Rent} = 0
   \]

### Conclusion:
- **Property 2**: 
  - Building Rent = \$1,152,480
  - Land Rent = \$0

- **Property 3**: 
  - Building Rent = \$1,806,000
  - Land Rent = \$0

Would you like more details on any step or additional calculations?

### Related Questions:
1. How does the capitalization rate affect property valuation?
2. Can the land value be calculated differently under varying market conditions?
3. What are the implications of a zero land rent on property valuation?
4. How can building depreciation be factored into rent calculations?
5. How does the interest rate on land influence overall property rent?

### Tip:
When evaluating property investments, it's crucial to differentiate between the values of the land and the building, as each can appreciate or depreciate differently over time.

Learn how to calculate building rent and land rent for two real estate properties based on their capitalization rates, property values, and interest rates. Detailed step-by-step calculations provided.

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