Real Estate Math
A property has a gross annual income of $60,000, a vacancy rate of 5%, and operating expenses of $24,000. What is the Net Operating Income (NOI)?
A$33,000✓ Correct
B$36,000
C$32,000
D$30,000
Explanation
EGI = $60,000 x (1 - 0.05) = $57,000. NOI = EGI - Operating Expenses = $57,000 - $24,000 = $33,000. NOI is the key income figure used in the income capitalization approach; it excludes debt service (mortgage payments) and income taxes.
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