Based on the information given the implied first-year overall capitalization rate is 9.50%.
Vacancy and collection losses = 9% of PGI
Vacancy and collection losses =$450,000×9% Vacancy and collection losses=$40,500
Effective gross income (EGI)= PGI - vacancy and collection losses
Effective gross income (EGI)= 450,000 - 40,500
Effective gross income (EGI)=$409,500
Operating expenses= 38% of EGI
Operating expenses= 0.38 × 409,500
Operating expenses=$155,610
Net operating Income(NOI)= EGI - Operating expenses
Net operating Income(NOI)=$409,500 - $155,610
Net operating Income(NOI)= $253,890
Capital expenditure= 4% of EGI
Capital expenditure= 409,500×4%
Capital expenditure= $16,380
Adjusted Net Operating Income=Net operating Income - Capital expenditure
Adjusted Net Operating Income=$253,890 - $16,380
Adjusted Net Operating Income=$237,510
Implied overall capitalization rate = Adjusted Net operating income ÷ Value of property
Implied overall capitalization rate=$237,510 ÷$2,500,000
Implied overall capitalization rate=9.50%
Inconclusion the implied first-year overall capitalization rate is 9.50%.
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