Question

A 1,500 square foot office space is leased at $12.00 square foot. The space is vacant one month out of the year. Office expenses are $6.50 per square foot and an expense stop is set at $6.00 per square foot. What is the annual net operating income? (rounded to the nearest $50)

(A) $7, 450

(B) $6,750

(C) $15,750

(D) $8,250

Answer 1

Here Office expenses are $6.50 per square foot and expense stop is set at $6.00 per square foot.

Expense stops are limitation measures set in order to lower the expense, so inspite of office expenses being 6.50 / sq foot, only 6 / sq foot will be the operating cost since the stop is set at $ 6 /sq foot

So total expense = 1500 * 6 = $ 9000

Now the office space is leased at $12.00 square foot

The space is vacant for 1 month , So income will be gathered for 11 months

hence, Total operating income = (11/12) * 1500 * 12 = $ 16500

Net operating income = $ 16500 - 9000 = $ 7500

So Option A) is the closest so it is the answer