Property Value [0516]

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Potential gross income is $600,000,  vacancy and collection losses are 10%, and the operating expense ratio is 37%.  The capitalization rate is 10%.  What is the value of the property?

 

Value = NOI ÷ Capitalization Rate

 

Potential Gross Income (PGI)

 

$600,000

Less:  Allowances

10%

$60,000

Other income

 

$0

Effective Gross Income (EGI)

 

$540,000

Less:  Operating Expenses (OE)

37%

$199,800

Net Operating Income (NOI)

 

$340,200

 

 

 

Cap Rate

 

10.0%

Value

 

$3,402,000

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