Homework Answers
STEP 1: CALCULATE NET OPERATING INCOME (NOI)
RENTAL INCOME(400*12*100) (A) 480000
LAUNDRY AND PARKING (B) 20000
POTENTIAL GROSS INCOME C =(A+B) 500000
VACANCY AND COLLECTION LOSS(7%) (D) (35000)
OPERATING EXPENSE(30%) (E) (150000)
NET OPERATING INCOME F= C-D-E 315000
EXPECTED SALES PRICE OF THE PROPERTY = NOI/CAPITALIZATION RATE
= 315000/9%
= 3,500,000
THE ANSWER IS D.
NOTE: WE DO NOT CONSIDER DEPRECIATION AND MORTGAGE EXPENSE WHILE CALCULATING NET OPERATING INCOME
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