Real Estate Principles 3rd Edition by David Ling,Wayne Archer

Exercise 8

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