Real estate investment | Course Hero Pro Answers

Real estate investment.

Suppose you own a vacant but developable land parcel on the outskirts of the metropolitan area. This land produces no income but owes 2% of its value per year in property taxes. Meanwhile, typical income properties are yielding 9% (that is, they have a current cash yield, or cap rate, of 9%). If inflation is expected to be around 3% per year, and you expect your land will appreciate at 10% per year, what should you do with this land parcel? (Be specific and please explain why you should do what you say.

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