Question

Bronson owns a 24-unit apartment building. In 1997, he rented all of the units for $150 a month and had 100% occupancy. In 1998, he increased the rent by 10%, but he had a 10% vacancy factor. His annual effective gross income was approximately:

Answer 1

To determine the annual effective gross income after rent increase and accounting for vacancy, Bronson's annual gross income would be $41,580 in 1998, a slight decrease from the previous year due to vacancies.

Step-by-step explanation:

To determine the annual effective gross income for Bronson's apartment building, we need to perform a few calculations:

1. Calculate the initial income in 1997 with 100% occupancy.
2. Calculate the new monthly rent in 1998 after a 10% increase.
3. Account for the 10% vacancy factor in 1998.
4. Compute the effective annual income for 1998.

In 1997, Bronson rented all 24 units at $150 each per month. The annual income for 1997 is therefore:

24 units * $150/month * 12 months = $43,200

In 1998, the rent increased by 10%, making the new rent:

$150 + ($150 * 10%) = $165/month

However, with a 10% vacancy factor, only 90% of the units are occupied:

24 units * 90% occupancy = 21.6, we round it down to 21 units because we cannot have a fraction of a unit rented.

Effective monthly income for 1998 is:

21 units * $165/month = $3,465

And the annual effective gross income is:

$3,465/month * 12 months = $41,580