An investor is considering the acquisition of a “distressed property” which is on Northwood Bank’s REO list. The property is available for $200,000 and the investor estimates that he can borrow $170,000 at 9 percent interest and that the property will require the following total average monthly expenditures of $2,450.a. The investor is wondering what such property must sell for after one year in order to earn ar return of 22 percent return (IRR) on equity?
b. What other issues must be considered in this analysis?