A multi-family property with one-bedroom and two-bedroom units. Calculate PGI, VRL, EGI, itemized operating expenses, and NOI.
Hints:
Net Operating Income — Word Problem
Unit Information
1BR Total Units
1BR Monthly Rent
1BR Vacant Units
2BR Total Units
2BR Monthly Rent
2BR Vacant Units
Operating Expense Inputs
Utilities (% of EGI)
RE Taxes (per unit)
Insurance (per unit)
Management (% of EGI)
All Other (% of EGI)
Results
Net Operating Income (NOI)
Total PGI
Total VRL
Effective Gross Income (EGI)
Total Operating Expenses
Step-by-Step Solution
PGI Breakdown: Where Income Goes
Hover or tap a slice to see details.
Operating Expenses Breakdown
Solution Roadmap
Net Operating Income — Multi-Family with Itemized Expenses
1 · Fill the building on paper
Potential gross income assumes every unit rented, every month. Two unit types means two calculations, each one units × monthly rent × 12, added together. The vacant units are counted here as though they were full.
2 · Take the empty units back out
Vacancy and collection loss is the rent the vacant units would have paid. Subtract it from PGI and what is left is effective gross income — the money the property actually collects, and the base every percentage expense is measured against.
3 · Itemize — and watch the two shapes
These five expenses do not all work the same way. Taxes and insurance are quoted per unit, so they scale with the unit count and are multiplied by TOTAL units, vacant ones included. Utilities, management and other are quoted as a percent of EGI. Applying one rule to all five is the mistake this step exists to prevent.
4 · What the property earns
EGI minus total operating expenses is net operating income. Nothing about the financing appears anywhere above — no loan, no payment, no debt service. NOI is what the real estate earns, before anyone decides how to pay for it.