Evaluating Offer

[Britt Griscom]

My wife and I own 10 condos in Santa Fe. Three of them are 1- bedrooms. We paid about 28k for each less than a year ago. Overall, we are making about 11% return. Recently Another owner expressed an interest in buying one of them for 36 or 37k. He wants to buy it on a RE contract, giving us 10k up front and paying 4.5 to 5% interest on the rest.

I'm trying to figure out how to evaluate his offer. I like that we would be making almost 10k in less than a year. I don't like that I would be making 5% interest when I could be making 11% by keeping the condo.

I'm trying to use the value = income/cap rate formula to find the value of keeping the condo, but I'm not sure what cap rate to use. Should I use 11% because that's the return we are making overall and that we could continue to make if we kept the condo?

To evaluate selling the condo, I'm trying to use the PV of an annuity formula, but again I'm not sure what interest rate to use.

Any help would be appreciated.