Question

a building has 7 office suites generating annual potential rent of $9,000 each vacacy =8% and annual expenses are $25,000 vending machine yield $3,000. what is the NOI

Answer 1

Net operating income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property, minus all reasonably necessary operating expenses.

The NOI is calculated as:

$NOI=RR-OE$

where:

$\begin{gathered} RR=\text{ Real Estate Revenue} \\ OE=\text{ Operating Expenditure} \end{gathered}$

Let us determine the revenue and expenditure.

Revenue:

There are 7 office suites, each with a potential annual rent of $9,000 each. Therefore, the total potential income on rent is:

$7\times9000=63,000$

The revenue from the vending machine is $3,000.

Hence,

$RR=63000+3000=66000$

Expenditure:

The vacancy is 8% of the expected rent. This is calculated to be:

$\frac{8}{100}\times63000=5040$

Annual expenses are $25,000.

Hence,

$OE=5040+25000=30040$

NOI:

Therefore, the NOI is calculated to be:

$\begin{gathered} NOI=66000-30040 \\ NOI=35960 \end{gathered}$

The NOI is $35,960.

The SECOND OPTION is correct.