Answered on: N/A. Time taken: N/A.
Retry questionRemote Work Real Estate
Case Interview Practice >
Math
One option the client is considering is converting a portion of their office space into residential apartments. They’ve asked us to run the numbers on a 250,000 sq ft building in Charlotte, NC. Here are the assumptions:
- Residential conversion cost: $200/sq ft
- Expected monthly rent per unit: $2,000
- Average unit size: 1,000 sq ft
- Annual operating expenses: 30% of gross rent
How many years would it take for the client to recover the conversion cost?
Case Exhibit
Your Response
Whoops... look like you haven't answered this question yet.
Sample answer from an expert consultant
Step 1: Conversion Cost
- 250,000 sq ft × $200/sq ft = $50M
Step 2: Number of Units
- 250,000 sq ft ÷ 1,000 sq ft/unit = 250 units
Step 3: Annual Gross Rent
- $2,000/month × 250 units × 12 months = $6,000,000
Step 4: Net Income
- $6M × (1 – 30%) = $4.2M/year
Step 5: Payback Period
- $50M ÷ $4.2M ≈ 11.9 years
Answer: It would take approximately 12 years to recover the conversion cost.
10-2
