Apartment

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1. Given the following owner’s income and expense estimates for an apartment property, formulate a reconstructed operating statement. The building consists of 10 units that could rent for $550 per month each.

Owner’s Income Statement
Rental income (last year)
$60,600
Less: Expenses
  Power
$2,200
  Heat
1,700
  Janitor
4,600
  Water
3,700
  Maintenance
4,800
  Reserves
2,800
  Management
3,000
  Depreciation
5,000
  Mortgage payments
6,300
34,100
Net income
$26,500

Estimating vacancy and collection losses at 5 percent of potential gross income, reconstruct the operating statement to obtain an estimate of NOI. Remember, there may be items in the owner’s statement that should not be included in the reconstructed operating statement. Using the NOI and a Ro of 11.0 percent, calculate the property’s indicated market value. Round your answer to the nearest $500.