California Real Estate Broker ExaminationReal Estate PracticeEasy
A property manager for an apartment complex is creating a budget for the upcoming year. The complex has 50 units, and the manager anticipates a 5% vacancy rate. Each unit rents for $1,500 per month. What is the estimated annual gross scheduled income for the complex, before accounting for vacancies?
- A$712,500
- B$900,000
- C$750,000
- D$850,000
Show answer & explanationAnswer & explanation
Correct answer: B. $900,000
To calculate the annual gross scheduled income, multiply the number of units by the monthly rent, then by 12 months. (50 units * $1,500/month/unit) * 12 months = $900,000.
Why the other options are wrong
- A. This calculation incorrectly applies the vacancy rate to the gross scheduled income. ($900,000 * 0.95 = $855,000, which is also incorrect for this option).
- C. This is the gross scheduled income for 10 months, not 12. (50 * 1500 * 10 = $750,000).
- D. This is an arbitrary incorrect number, not derived from the given figures.
Gross Scheduled Income (GSI)
Gross Scheduled Income (also known as Potential Gross Income) is the total potential rental income a property could generate if all units were occupied and paying full market rent for the entire year.
- Calculated before accounting for vacancies or collection losses.
- Forms the starting point for property income analysis.
- Used in various valuation methods, such as the income approach.
Memory trick: Income comes in, expenses go out, profit remains.