Real Estate Math

A Washington building has 15 units at $1,200/month and 5 units at $1,450/month. Annual vacancy rate is 6%. What is the effective gross income?

A$284,820✓ Correct

B$226,620

C$229,800

D$255,600

Explanation

PGI = (15 × $1,200 + 5 × $1,450) × 12 = ($18,000 + $7,250) × 12 = $25,250 × 12 = $303,000. EGI = $303,000 × (1 − 0.06) = $303,000 × 0.94 = $284,820.94 = $284,820. But answer A is $218,640. Let me recheck: 15 × $1,200 = $18,000/mo; 5 × $1,450 = $7,250/mo. Total monthly = $25,250. Annual PGI = $25,250 × 12 = $303,000. EGI = $303,000 × 0.94 = $284,820.

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