Real Estate Math
A property generates $48,000 in annual gross rent. The vacancy rate is 5% and operating expenses are $18,000. What is the net operating income (NOI)?
A$27,600✓ Correct
B$28,000
C$27,000
D$30,000
Explanation
EGI = $48,000 × (1 − 0.05) = $48,000 × 0.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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