In opposing HUD's proposal, the coalition said that median gross rents
do not reflect market conditions and affirmed that median gross rents
are based on outdated information and not adjusted for inflation.
This calculation assumes four void weeks in every year and total operating costs of 32% of gross rents
(management fees, running costs and depreciation), and an interest-only mortgage charged at 4.5%.
are in the upper-20's to mid-30's with cash flows averaging $15/sq ft.
Under the first, SSP would pay them $21,000 annual rent plus 40% of the annual gross rents in excess of $52,500; the $21,000 was guaranteed even if SSP did not rent the condominium to any third parties.
These amounts reflected 39%-49% occupancy rates; most of the units examined had lease agreements under SSP's second plan, under which the owners received 50% of the gross rents. The expert concluded that the $21,000 received by the Razavis was a fair rental for the condominium for a year.
Under the agreement, the company was the exclusive rental agent for the units and was entitled to a percentage of the gross rents
as its management fee.
On an individual basis, the properties traded in the range of 5 to 6 percent cap rates and rent roll multiples of 9.5 to 10.5 times gross rents
range from $10 to $15 a square foot, added Surry, and could go higher depending on whether it's a gross deal or not.
The main reason for this drop, he explained, is that, at that time, prices were more inflated and properties were selling for 10 to 12 times the gross rents.
Currently, in good neighborhoods, Knakal said, investors are paying 4 to 5 times the gross rent while in the secondary and tertiary market, investors are paying 1.5 and 2 times gross rent.
Traditionally, rent has been quoted inclusive of operating expenses, otherwise known as the "gross rent