19 22 Use the following data Rents 50000 Property tax 10000

19- 22 Use the following data: Rents $50,000 Property tax $10,000 Utilities $16,000 Insurance $ 8,000 Maintenance $ 3,000 Interest Expense $12,000 Depreciation $ 8,000

19. Determine “Net operating income” ________________________________

20. Determine “Taxable income/(loss)” ________________________________

21. Determine “Cash from operations” _________________________________

22. Name three reasons why a REIT might be used for real estate investment:

1 ________________________________

2 ________________________________

3 _________________________________

Solution

19) Net operating income

- Rent income - 50,000

- utilities -(16,000)

- Isurance -(8,000)

- Maintenance -(3,000)

- Depreciation -(8,000)

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Operating income = 15,000

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20) taxable income = operating income - interest expense

= $15,000- $12,000

= $3,000

21) cash from operation = net income + depreciation

= $3,000-10,000+$8,000

=$1,000

22)

- Return ; investors can earn dividents from thier investments

- Less risky ; share can be sold out very quickly , highly liquid.

- Transperent - It is operated in accordance with major stock exchanges operate under the same rules as other publicly listed securities for regulatory and reporting purposes.