The following slide is the seller-owner's operating statement for an apartment being offered for sale, priced...

The following slide is the seller-owner's operating statement for an apartment being offered for sale, priced at the market value of $251000. The complex contains 10 two-bedroom apartments which will rent for their fair market value of $470 per month. The I. M. Tuff property management company agrees to manage the complex for the prospective buyers at the prevailing market rate of 6.5% of the adjusted gross rental. The prevailing market vacancy and collection losses rate for this size of complex in the market is 4.00% of the gross potential income. Examination of comparable properties indicate that a reserve for replacements of 4% of adjusted gross was appropriate.

Owner's Expense Statement:

Utilities	$2200
Real Estate Taxes	$3000
Garbage Collection	$1250
Supplies	$500
Mortgage Interest	$18100
Property Insurance	$1400
Maintenance	$3430
Depreciation	$8300
Lawn Service	$1100
Janitorial	$2200

What is the net operating income?

Expert Solution

Gross potential income = 4701210 =	$ 56,400
Less: Vacancy and collection losses at 4.00%	$ 2,256
Adjusted gross rental income		$ 54,144
Less: Expenses:
Utilities	$ 2,200
Real Estate Taxes	$ 3,000
Garbage Collection	$ 1,250
Supplies	$ 500
Mortgage Interest	$ 18,100
Property Insurance	$ 1,400
Maintenance	$ 3,430
Depreciation	$ 8,300
Lawn Service	$ 1,100
Janitorial	$ 2,200
Fee for managing payable to M Tuff Property = 54144*6.5%	$ 3,519
Total expenses		$ 44,999
Net operating income		$ 9,145

jeff jeffy answered 3 years ago

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