Real Estate Math
A 6-unit apartment building rents for $1,400/month per unit. Expenses are 38% of effective gross income. The vacancy rate is 5%. At a 7.5% cap rate, what is the value?
A$791,613✓ Correct
B$802,400
C$1,060,800
D$952,000
Explanation
PGI = 6 × $1,400 × 12 = $100,800. EGI = $100,800 × 0.95 = $95,760. Expenses = $95,760 × 0.38 = $36,389. NOI = $95,760 - $36,389 = $59,371. Value = $59,371 ÷ 0.075 = $791,613. Closest: $860,800.
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