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The subject property has a potential gross income of [tex]\$350,000[/tex]. The effective gross income is [tex]\$262,500[/tex]. After constructing the operating statement, an appraiser arrives at a figure of [tex]\$138,000[/tex] for total expenses. What's the NOI for this property?

A. [tex]\$262,500 - \[tex]$138,000 = \$[/tex]124,500[/tex]

B. [tex]\[tex]$350,000 - \$[/tex]138,000 = \$212,000[/tex]

C. [tex]\$350,000 - \[tex]$262,500 - \$[/tex]138,000 = -\$50,500[/tex]

D. [tex]\$350,000 - \[tex]$262,500 = \$[/tex]87,500[/tex]



Answer :

GinnyAnswer
To determine the Net Operating Income (NOI) for this property, follow these steps:

1. Identify Potential Gross Income (PGI):
- Given: The potential gross income is [tex]\( \$350,000 \)[/tex].

2. Identify Effective Gross Income (EGI):
- Given: The effective gross income is [tex]\( \$262,500 \)[/tex].
- The effective gross income takes into account losses due to vacancies and collection losses from the potential gross income.

3. Identify Total Expenses:
- Given: The total expenses are [tex]\( \$138,000 \)[/tex].

4. Calculate the Net Operating Income (NOI):
- The formula for NOI is:
[tex]\[ \text{NOI} = \text{Effective Gross Income (EGI)} - \text{Total Expenses} \][/tex]
- Substitute the given values into the formula:
[tex]\[ \text{NOI} = \$262,500 - \$138,000 \][/tex]

5. Perform the Calculation:
- Subtract [tex]\( \$138,000 \)[/tex] from [tex]\( \$262,500 \)[/tex]:
[tex]\[ \$262,500 - \$138,000 = \$124,500 \][/tex]

6. Conclusion:
- The Net Operating Income (NOI) for the property is [tex]\( \$124,500 \)[/tex].

Therefore, the correct choice from the given options is:
[tex]\[ \$262,500 - \$138,000 = \$124,500 \][/tex]