Use the following to answer questions 1-5:
A local 20,000 square foot retail building is 100% occupied by a single tenant. The lease started last week and continues for 10 years. The rent is $7.00 per square foot per year. The landlord pays all the expenses associated with the building. The expenses total $2.00 per square foot per year, and we have determined that they are market-oriented. From a market survey, it is our opinion that 5% is a reasonable vacancy allowance and 2% is a reasonable allowance for collection loss. The market expects a 9% return on investment (overall rate) for investments like this.
The potential gross income (PGI) of the property is _______
a. |
$140,000 |
|
b. |
$280,000 |
|
c. |
$130,200 |
|
d. |
$90,000 |
The effective gross income (EGI) of the property is:
a. |
$90,200 |
|
b. |
$130,200 |
|
c. |
$280,000 |
|
d. |
$140,000 |
The total expenses are:
a. |
$80,000 |
|
b. |
$130,200 |
|
c. |
$20,000 |
|
d. |
$40,000 |
The net operating income (NOI) of the property is:
a. |
$140,000 |
|
b. |
$280,000 |
|
c. |
$130,200 |
|
d. |
$90,200 |
I will make sure to thumbs up if correct!
1)
Potential gross income = $ 7.00 x 20,000 = $140,000
Potential gross income = $ 140,000
2)
vacancy loss = 5%
vacancy loss = 0.05 x $ 140,000 = $ 7,000
credit loss = 2%
credit loss = 0.02 x $ 140,000 = $ 2,800
Effective gross income = $ 140,000 - $ 7,000 - $ 2,800 = $130,200
Effective gross income = $ 130,200
3) The total expenses are = $ 2.00 x 20,000
= $40,000.
The total expenses are = $ 40,000
4)
Net operating income of the property = effective gross income -
total expenses
net operating income of the property = $ 130,200 - $
40,000
= $90,200.
net operating income of the property = $ 90,200
Use the following to answer questions 1-5: A local 20,000 square foot retail building is 100%...
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