Answer:
The correct option is b. 1.01%.
Explanation:
This can be calculated as follows:
Potential gross income = Number of apartment units * Monthly rent per unit = 15 * $3,000 = $45,000
Therefore, we have:
Details Amount ($)
Potential gross income (PGI) 45,000
Vacancy and collection loss (10% of PGI) <u> (4,500) </u>
Effective gross income (EGI) 40,500
Operating expenses: 5% of effective gross income (2,025)
Capital expenditures (10% of effective gross income) <u> (4,050) </u>
Net operating income <u> 34,425 </u>
Acquisition price = 3,420,000
Going-in capitalization rate = Net operating income / Acquisition price = $34,425 / $3,420,000 = 0.0101, or 1.01%
Therefore, the correct option is b. 1.01%.
