Question

The cash flows below contain the year 1 cash flows for a potential real estate investment. What is the property's operating expense ratio? Year 1 Number of Units 75 Average Rent $800 Potential Gross Income $720,000 Vacancy and Collection Losses ($72,000) Effective Gross Income $648,000 Operating Expenses ($243,389) ($19,440) Capital Expenditures $385.171 Net Operating Income 5n ($323,301) Annual Debt Service $61,870 Before-Tax Cash Flow 82 41.3%

Answer 1

37.56%

Step-by-step explanation:

Given that:

Operating expenses = $243,389

Effective gross income = $648,000

The computation of property's operating expense ratio is shown below;

Operating expenses ratio = Operating expenses ÷ Effective gross income

= $243,389 ÷ $648,000

= 0.3756

= 37.56%

Therefore, the property's operating expense ratio is 37.56%