A Pennsylvania apartment building has 12 units renting at $1,200 per month, a 5% vacancy rate, and operating expenses equal to 40% of effective gross income. What is the annual NOI?

Explanation

Gross Potential Income = 12 units times $1,200 times 12 months = $172,800. Vacancy loss = 5% times $172,800 = $8,640. Effective Gross Income = $172,800 minus $8,640 = $164,160. Operating Expenses = 40% times $164,160 = $65,664. NOI = EGI minus Operating Expenses = $164,160 minus $65,664 = $98,496. This calculation sequence — from gross potential income through vacancy, effective gross income, expenses, and finally NOI — is foundational for Pennsylvania income property analysis.