A multifamily property generated $85,000 in NOI in 2021 and is projected to generate $90,000 in 2022.  You intend to sell the property at the start of 2022 at forward cap rate of 7.00%.  The selling costs will be 4% of the sales price.  The property tax in the 2022 NOI is budgeted at $15,000.  However, once the building sells the true property tax will be 2.0% of the Sales Price.  Assume the future buyer is sophisticated and values the property based on true 2022 property tax rather than the budgeted amount.  What are the expected sales proceeds for this property on January 1, 2022, rounded down to the nearest 10,000? 
and 80,000 and 960,000 and 1,440,000 and all wrong 

To calculate the expected sales proceeds for this multifamily property on January 1, 2022, we need to follow these steps:

### 1. Determine the initial projected NOI after correcting for property taxes
- The projected **NOI for 2022** is $90,000.
- However, the buyer will base the valuation on the actual property tax, which is 2.0% of the sales price, not the budgeted $15,000. 
- To find the actual NOI, we first need to calculate the sales price.

### 2. Initial calculation of sales price based on forward cap rate and NOI

A forward cap rate is used to value the property as follows:

\[
\text{Sales Price} = \frac{\text{Projected NOI}}{\text{Cap Rate}}
\]

Here:
- Projected NOI = $90,000
- Cap rate = 7.00% = 0.07

\[
\text{Sales Price (Initial)} = \frac{90,000}{0.07} = 1,285,714.29
\]

### 3. Adjust for actual property taxes
The actual property tax will be 2.0% of the sales price. Therefore, the actual property tax amount is:

\[
\text{Property Tax} = 2.0\% \times \text{Sales Price} = 0.02 \times 1,285,714.29 = 25,714.29
\]

Since the projected NOI includes the budgeted property tax of $15,000, we need to adjust the NOI by reducing it by the difference between the actual and budgeted property taxes:

\[
\text{Tax Difference} = 25,714.29 - 15,000 = 10,714.29
\]

\[
\text{Adjusted NOI} = 90,000 - 10,714.29 = 79,285.71
\]

### 4. Recalculate the sales price based on the adjusted NOI

Using the adjusted NOI, we recalculate the sales price:

\[
\text{Sales Price (Final)} = \frac{79,285.71}{0.07} = 1,132,653.14
\]

### 5. Calculate the selling costs and net proceeds
The selling costs are 4% of the sales price:

\[
\text{Selling Costs} = 0.04 \times 1,132,653.14 = 45,306.12
\]

Now, subtract the selling costs from the sales price to find the **expected sales proceeds**:

\[
\text{Sales Proceeds} = 1,132,653.14 - 45,306.12 = 1,087,347.02
\]

### 6. Round down to the nearest 10,000
The final expected sales proceeds, rounded down to the nearest 10,000, is:

\[
\boxed{1,080,000}
\]

### Conclusion:
The expected sales proceeds for the property on January 1, 2022, is **$1,080,000**, rounded down to the nearest 10,000.

---

Would you like further clarification or more details?

Here are 5 related questions for deeper understanding:
1. How does changing the cap rate affect the property value?
2. What if the budgeted NOI had been correct—how would the sales proceeds differ?
3. How do property taxes typically influence real estate investment returns?
4. How could future appreciation affect the buyer’s cap rate decision?
5. What are the pros and cons of using NOI vs. other methods to value a property?

**Tip**: When valuing properties, always ensure that the actual operating expenses, especially taxes, are accurate to avoid overvaluation or undervaluation.

A multifamily property generated $85,000 in NOI in 2021 and is projected to generate $90,000 in 2022. You intend to sell the property at the start of 2022 at forward cap rate of 7.00%. The selling costs will be 4% of the sales price. The property tax in the 2022 NOI is budgeted at $15,000. However, once the building sells the true property tax will be 2.0% of the Sales Price. Assume the future buyer is sophisticated and values the property based on true 2022 property tax rather than the budgeted amount. What are the expected sales proceeds for this property on January 1, 2022, rounded down to the nearest 10,000?

Learn how to calculate the expected sales proceeds for a multifamily property using the forward cap rate, NOI, and adjusted property taxes. Detailed breakdown includes key formulas for sales price, property tax adjustments, and selling costs. Ideal for finance and real estate students.

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