Jerry owns an apartment building with 10 units. The rent for all units is $2,000 per month. The building is 50% vacant. What is the potential gross income (per month) of Jerry's property?

Rationale

The potential gross income of Jerry's property is $20,000 per month.

Potential gross income is calculated based on the total possible rent that could be collected if all units were occupied. Jerry's building has 10 units, each renting for $2,000, which would result in a maximum income of $20,000 if fully rented, regardless of the current vacancy rate.

A ($10,000) YOUR ANSWER

This figure represents half of the potential gross income, which might mistakenly reflect the income from the occupied units only. However, potential gross income considers the total rent from all units, not just those currently occupied. Therefore, this choice does not accurately represent the full income potential of the property.

B ($5,000) YOUR ANSWER

This amount is significantly lower than the actual potential gross income. It might suggest a misunderstanding of either the total number of units or the rent per unit. Since the building consists of 10 units at $2,000 each, the income potential cannot be as low as $5,000 per month.

C ($15,000) YOUR ANSWER

This choice could represent a scenario where some units are occupied, but it still does not reflect the full potential gross income. The calculation for potential gross income should be based solely on the total rent from all units, leading to the conclusion that $15,000 is an incomplete representation of the income potential.

D ($20,000) CORRECT

This figure accurately reflects the total rent for all 10 units at $2,000 each. The potential gross income does not account for vacancies, as it exclusively considers the full rental income if every unit were occupied.

Conclusion

Understanding potential gross income is crucial for property owners, as it represents the maximum income achievable from a rental property. In Jerry's case, with 10 units each renting for $2,000, the potential gross income amounts to $20,000 per month, irrespective of the current vacancy rate. This figure is essential for assessing the overall profitability and financial health of his investment.

Jerry owns an apartment building with 10 units. The rent for all units is $2,000 per month. The building is 50% vacant. What is the potential gross income (per month) of Jerry's property?

The potential gross income of Jerry's property is $20,000 per month.

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