u are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI) in the first year to be $450,000; vacancy and collection losses to be 9 percent of PGI;

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Darshita 6.14K January 1, 2017 0 Comments

You are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI) in the first year to be $450,000; vacancy and collection losses to be 9 percent of PGI; and operating expenses and capital expenditures to be 42 percent of effective gross income (EGI). What is the estimated Net Operating Income? What is the implied first year overall capitalization rate? What is the effective gross income multiplier?

Item Amount
Potential gross income (PGI) $450,000
– Vacancy & collection loss (VC) 40,500
= Effective gross income (EGI) 409,500
– Operating expenses (OE) 171,990
= Net operating income (NOI) 237,510

What is the overall capitalization rate?

What is the effective gross income multiplier

u are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI) in the first year to be $450,000; vacancy and collection losses to be 9 percent of PGI;

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