Real Estate Math
A Minnesota investor purchases a rental property for $195,000. The property generates $1,800/month in rent with a 5% vacancy rate. What is the effective gross income?
A$21,600
B$20,520✓ Correct
C$18,900
D$22,140
Explanation
Potential gross income = $1,800 x 12 = $21,600. Vacancy loss = $21,600 x 5% = $1,080. EGI = $21,600 - $1,080 = $20,520. Effective gross income accounts for expected vacancy and credit losses to provide a realistic income estimate for investment analysis.
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