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Calculate Net Operating Income for a rental property

Calculate the net operating income, given the following information:
Potential gross income: $295,000
Capitalization rate: 9%
Vacancy and collection losses: 8%
Selling expenses: 5 %
Sale price: $1,250,000

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Net Operating Income or NOI is equal to a property's yearly gross income less operating expenses. Gross income includes both rental income and other income such as parking fees, laundry and vending receipts, etc. All income associated with a property. Operating expenses are costs incurred during the operation and maintenance of a property. They include repairs and maintenance, insurance, management ...

Solution Summary

The solution first discusses and explains the definition and process for the calculation net operating income for a rental property. The information is sourced. The formulas are listed and then applied to this problem to calculate net operating income (NOI). The capitalization rate (cap rate) formula is applied also.