Real Estate Math
A Nevada investment property has a potential gross income of $120,000, vacancy of 8%, and operating expenses of $45,000. What is the expense ratio?
A37.5%
B40.9%✓ Correct
C45%
D35%
Explanation
Effective Gross Income = $120,000 – (8% x $120,000) = $120,000 – $9,600 = $110,400. Expense ratio = Operating Expenses / EGI = $45,000 / $110,400 = 40.76%, approximately 40.9%.
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