California Real Estate SalespersonProperty Valuation and Financial AnalysisMedium
A small apartment building has a Gross Potential Income (GPI) of $100,000 per year. During the year, the owner experienced $8,000 in vacancy loss and $2,000 in uncollected rent (bad debt). What is the vacancy and collection loss rate for this property?
- A9%
- B10%
- C12%
- D8%
Show answer & explanationAnswer & explanation
Correct answer: B. 10%
Total vacancy and collection loss = $8,000 + $2,000 = $10,000. Rate = $10,000 ÷ $100,000 GPI = 10%.
Why the other options are wrong
- A. Incorrect combined percentage.
- C. Overstates the loss percentage.
- D. Reflects only vacancy loss, not total loss.
Vacancy and Collection Loss Rate
The percentage of Gross Potential Income lost due to vacancies and uncollected rent, calculated as total loss divided by GPI.
- Combines vacancy loss and bad debt
- Expressed as a percentage of GPI
- Used to calculate Effective Gross Income (EGI)
Memory trick: Add the losses, divide by potential income