7. Use the information provided below to calculate the year 2 effective gross in

Question

7. Use the information provided below to calculate the year 2 effective gross income for the property that has been described. Property Type: Shopping center Leasable Space: 125,000 square feet Average Rent: $25 per square foot per year Annual Rent Growth: 3% Other Income: $0.50 per square foot per year Annual Other Income Growth: 4% Vacancy and Collection Losses: 15% of potential gross income Operating Expenses: 40% of effective gross income Capital Expenditures: 3% of effective gross income

Please show how to solve using a BA II plus calculator

Explanation / Answer

Details Year 1 Year 2 Leasable Space sq ft              125,000             125,000 Average rent /sq ft (3% growth yr 2)                   25.00                  25.75 Potential Gross Income          3,125,000          3,218,750 Assume effcetive gross income of year 2    is k Effcetive Goss Income calculation Other Income rate /sq ft(4% + in Yr2)                     0.50                    0.52 Other Income =                62,500                65,000 Vacancy and collection loss @15% of potential gross income=            (468,750)           (482,813) Operating expense =40% of effective gross income= -0.4k Capital Expenditure =3% Effective gross income=    -0.03k So , 3218750+65000-482813-0.43k=k 2800938-0.43k=k k=1958698 So effective Gross Income for Year 2= $ 1,958,698.0

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