If an investor desires an 11% return on an investment but finds a property priced at $360,000 with a gross income of $60,000 and expenses of $22,000, how much is the property overpriced for the investor to achieve the desired return?

To determine if the property is overpriced, we first need to calculate the net operating income (NOI) of the property. The NOI is found by subtracting the total expenses from the gross income. In this instance, the gross income is $60,000, and the expenses are $22,000, leading to an NOI of $38,000 ($60,000 - $22,000).

Next, to find the property value that would provide the investor with the desired return of 11%, we apply the formula for return on investment, which states that the property value should equal the net operating income divided by the desired rate of return. Therefore, the valuation for the investor would be:

Property Value = NOI / Desired Return

Property Value = $38,000 / 0.11 = $345,454.55 (approximately).

The current price of the property is $360,000. To ascertain whether it is overpriced, we subtract the calculated value from the actual sale price.

$360,000 - $345,454.55 = $14,545.45.

Since the calculated price to achieve the desired return is lower than the market price, this indicates that the property is overpriced. Rounding to the nearest whole