Problem
A retail property has one tenant on a 4-year lease which will commence on Jan 1, 2023. The lease provides the owner with NOI of $350,000 at the end of the year for the next two years (2023 - 2024). After that, according to the lease, NOI steps up to $400,000 for the remaining two years.
Assume at the end of the term (2026), the property is sold for $10,000,000.
Using the income approach, what is the market value of the property? The cap rate is 8%