Real Estate Math
A Hawaii residential building has 10 units each renting for $2,200/month. With a 6% vacancy rate, what is the annual effective gross income?
AA. $248,160✓ Correct
BB. $264,000
CC. $252,000
DD. $240,000
Explanation
Potential gross = 10 × $2,200 × 12 = $264,000. Vacancy = $264,000 × 0.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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