Real Estate Math
A 20-unit apartment building has 2 vacant units at any given time. All occupied units rent for $900/month. What is the annual effective gross income?
A$183,600
B$194,400✓ Correct
C$201,600
D$216,000
Explanation
Occupied units = 20 − 2 = 18 units. Annual EGI = 18 × $900 × 12 = $194,400.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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