Question

Given the following information, calculate the net operating income assuming below-line treatment of capital expenditures: property: 4 office units, contract rents per unit: $2,500 per month; vacancy and collection losses: 15%; operating expenses: $42,000; capital expenditures: 10%.

Answer 1

Net operating income is $60,000

Step-by-step explanation:

Numbers of Property = 4 units

Operating Expenses = $42,00)

Contract rents = $2500 / month

Vacancy and collection losses = 15%

Property Gross Rent = Number of Units x Contract rent per unit x No, of Months = 4 units x $2500 x 12 months = $120,000

Property Net Rent = Property Gross Rent - Vacancy and collection losses = $120,000 - ( $120,000 x 15% ) = $120,000 - $18,000 = $102,000

Property operating Income = Property Net Rent - Operating Expenses = 102,000 - 42,000 = $60,000

Answer 2

$60,000

Step-by-step explanation:

Property is 4 units

OE= 42,000 (of EGI)

Contract rents is 2500 per month

VC=15%

PGI=4*2500*12=120,000

120,000 -VC 18,000

EGI= 102,000

102,000 - OE 42,000

NOI= $60,000