Using the following information, determine the net operating income (NOI) for the first year of operations of the subject property using "above-line" treatment of capital expenditures. $$\begin{array} { | c | c | }
\hline \text { Subject Prqperty } & \
\hline \text { Nurber of apartrments } & 15 \
\hline \text { Market Rent (permonth) } & 1000 \
\hline \text { Vacarcy ard Collecticn Losses } & 10 \% \text { of PGI } \
\hline \text { Operating Expenses } & 5 \% \text { of EGI } \
\hline \text { Capital Expenditures } & 10 \% \text { of EGI } \
\hline
\end{array}$$
A) $135,000
B) $137,700
C) $153,900
D)$162,000

Question

Using the following information, determine the net operating income (NOI) for the first year of operations of the subject property using "above-line" treatment of capital expenditures. $$\begin{array} { | c | c | } 
\hline \text { Subject Prqperty } & \
\hline \text { Nurber of apartrments } & 15 \
\hline \text { Market Rent (permonth) } & 1000 \
\hline \text { Vacarcy ard Collecticn Losses } & 10 \% \text { of PGI } \
\hline \text { Operating Expenses } & 5 \% \text { of EGI } \
\hline \text { Capital Expenditures } & 10 \% \text { of EGI } \
\hline
\end{array}$$
A) $135,000
B) $137,700
C) $153,900
D)$162,000

Quizplus · Accepted Answer

1) Potential Gross Income (PGI) = Number of apartments * Market rent * 12 months
= 15 * 1000 * 12
= $180,000

2) Vacancy and Collection Losses= 10% of PGI
= 0.1 * $180,000
= $18,000

3) Effective Gross Income (EGI) = PGI - Vacancy and Collection Losses
= $180,000 - $18,000
= $162,000

4) Operating Expenses = 5% of EGI
= 0.05 * $162,000
= $8,100

5) Capital Expenditures = 10% of EGI
= 0.1 * $162,000
= $16,200

6) Net Operating Income (NOI) = EGI - Operating Expenses - Capital Expenditures
= $162,000 - $8,100 - $16,200
= $137,700

Therefore, the net operating income (NOI) for the first year of operations of the subject property using "above-line" treatment of capital expenditures is $137,700.

Using the Following Information, Determine the Net Operating Income (NOI)