Question

a building has 7 office suites generating annual potential rent of $9,000 each vacacy =8% and annual expenses are $25,000 vending machine yield $3,000. what is the NOI

Answer 1

Net operating income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property, minus all reasonably necessary operating expenses.

The NOI is calculated as:

`NOI=RR-OE`

where:

`\begin{gathered} RR=\text{ Real Estate Revenue} \\ OE=\text{ Operating Expenditure} \end{gathered}`

Let us determine the revenue and expenditure.

Revenue:

There are 7 office suites, each with a potential annual rent of $9,000 each. Therefore, the total potential income on rent is:

`7*9000=63,000`

The revenue from the vending machine is $3,000.

Hence,

`RR=63000+3000=66000`

Expenditure:

The vacancy is 8% of the expected rent. This is calculated to be:

`(8)/(100)*63000=5040`

Annual expenses are $25,000.

Hence,

`OE=5040+25000=30040`

NOI:

Therefore, the NOI is calculated to be:

`\begin{gathered} NOI=66000-30040 \\ NOI=35960 \end{gathered}`

The NOI is $35,960.

The SECOND OPTION is correct.