Property Valuation
A West Virginia property generates the following: PGI = $60,000; Vacancy = 5%; Operating Expenses = $20,000. What is the Net Operating Income?
A$37,000✓ Correct
B$40,000
C$17,000
D$57,000
Explanation
EGI = $60,000 - ($60,000 x 0.05) = $60,000 - $3,000 = $57,000.
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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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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