Real Estate Math
An apartment building has a gross annual income of $120,000, vacancy and collection loss of 5%, and operating expenses of $42,000. What is the Net Operating Income (NOI)?
A$72,000
B$78,000✓ Correct
C$72,000
D$114,000
Explanation
Effective Gross Income = $120,000 × (1 - 0.05) = $114,000. NOI = $114,000 - $42,000 = $72,000. Wait — $114,000 - $42,000 = $72,000. The correct answer is $72,000 (option A = option C, which is the same). NOI = EGI - Operating Expenses = $114,000 - $42,000 = $72,000.
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