A retail center's rent roll shows $340,000 potential, 8% vacancy and collection loss, and $12,500 in reimbursements. EGI is:
Correct Answer
B) $325,300
Why this is correct: Effective Gross Income (EGI) is Potential Gross Income minus vacancy/collection loss, plus other income like reimbursements. Here, PGI is $340,000. An 8% vacancy loss is 340,000 * 0.08 = $27,200. So, PGI minus vacancy is 340,000 - 27,200 = $312,800. Tenant reimbursements of $12,500 are then added to this amount, resulting in an EGI of 312,800 + 12,500 = $325,300. Why the other choices are wrong: "$312,800 excluding the reimbursements" is the income after vacancy but before adding reimbursements, so it is not the final EGI. "$352,500 before any deduction" incorrectly adds reimbursements to the full PGI without deducting vacancy. "$300,300 deducting reimbursements as well" mistakenly subtracts reimbursements instead of adding them. Exam tip: Remember the EGI formula: PGI - Vacancy + Other Income. Reimbursements are always added, never subtracted.
Why This Is the Correct Answer
Why this is correct: Effective Gross Income (EGI) is Potential Gross Income minus vacancy/collection loss, plus other income like reimbursements. Here, PGI is $340,000. An 8% vacancy loss is 340,000 * 0.08 = $27,200. So, PGI minus vacancy is 340,000 - 27,200 = $312,800. Tenant reimbursements of $12,500 are then added to this amount, resulting in an EGI of 312,800 + 12,500 = $325,300. Why the other choices are wrong: "$312,800 excluding the reimbursements" is the income after vacancy but before adding reimbursements, so it is not the final EGI. "$352,500 before any deduction" incorrectly adds reimbursements to the full PGI without deducting vacancy. "$300,300 deducting reimbursements as well" mistakenly subtracts reimbursements instead of adding them. Exam tip: Remember the EGI formula: PGI - Vacancy + Other Income. Reimbursements are always added, never subtracted.
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