Expected IRR Calculation for Direct Real Estate Investment

As an asset manager specializing in real estate investments, you are evaluating a potential direct investment in a multifamily rental property located in a suburban area. The property has a stable occupancy rate of 95% and generates an annual net operating income (NOI) of $500,000. The acquisition cost of the property is $6,000,000, and you anticipate an annual appreciation rate of 3% over the next 10 years.

Given the current market conditions and comparable sales, you also estimate that the property will incur annual operating costs of 30% of the NOI. After considering an appropriate capitalization rate of 7% for similar properties in the area, you want to determine whether this investment would yield an expected internal rate of return (IRR) that meets the firm's minimum required return of 8%.

What is the expected IRR of this investment over the 10-year period?