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NEW QUESTION: 1
Gold Coast Apartments, a 160-unit complex, has 100 one-bedroom and 60 two-bedroom apartments, which rent for $700 and $900 per month, respectively. The complex earns $22,000 per year from its laundry facilities. The following data is available: Vacancy and collection losses are 6% of effective gross potential income, Annual property insurance and taxes amount to $154,000 Average annual costs of repairs, utilities, garbage and management are $209,000
The property was purchased for $5.10 million. The annual mortgage payment for the property (20-year,
9 % mortgage on 80% of the property value) is $440,526. What is Gold Coast\' net operating income?
A. $1,056,400
B. $615,871
C. $689,200
Answer: A
Explanation:
Mortgage payments and interest expenses depend upon the financing choice of the investor, not operations. Therefore, these costs are not considered in the net operating income (NOI) computations.
Net operating income can be calculated as follows: Gross Rents 1,488,000 Other Income 22,000 Gross potential income 1,510,000 Less Vacancy losses at 6% -90,600 Effective gross income 1,419,400
Operating expenses Property insurance and taxes -154,000 Management and other expenses -209,000
Net operating income 1,056,400

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