Question

If a corporate building has nine office suites that rents for $14,800 per month each, but suffers from a 14% vacancy rate and annual expenses of $21,100, what is the NOI of the building (round to the nearest $100)?

Answer 1

The net operating income of the building (NOI)=$1,353,500

Step-by-step explanation:

The net operating income is a financial tool used to determine if a business is profitable. It involves getting the difference between all the revenue generated by the property and the expenses that might be incurred in it's operation. This can be expressed as;

NOI=R-E

where;

NOI=net operating income

R=total annual revenue

E=total annual expense expenditure

In our case;

NOI=unknown

Revenue=Rent per month per office suite×number of months×number of suites×occupancy rate

and;

Rent per month per suit=$14,800

number of months in a year=12

number of suites=9

occupancy rate=(100%-14%)=86%

occupancy rate=86/100=0.86

Revenue=14,800×12×9×0.86=$1,374,624

Total annual expense=$21,100

replacing;

NOI=1,374,624-21,100=$1,353,524

1,353,524 rounded off to the nearest $100=$1,353,500

The net operating income of the building (NOI)=$1,353,500