## EXAMPLE OF INVESTOR’S ANNUAL OPERATING RETURN

Below is a sample of how Commercial Real Estate Brokers calculate the annual investor’s return.

SCHEDULE GROSS INCOME: \$1,000,000.00
(All Revenue; Rents, Late Fees, Fines, Fees, Garages)
Multiple by 5%
(VACANCY FACTOR)  \$50,000.00(\$1,000,000.00-\$50,000.00)
EQUALS = EFFECTIVE GROSS INCOME OR GROSS OPERATING INCOME
\$950,000.00 EGI or GOI

\$950,000.00 EGI or GOI
Multiple by 35%
EXPENSE FACTOR = \$332,500.00
(\$950,000.00 Subtract \$332,500.00)
EQUALS = NET OPERATING INCOME OF \$617,500.00
MORTGAGE PAYMENT
(amortized over 30 years to obtain monthly payment then multiplied  by 12 months
\$22,003.20 annual payment or DEBT SERVICE

NET OPERATING INCOME OF \$617,500.00
Minus DEBT SERVICE \$22,003.20

=PRETAX CASH FLOW
\$595,497.80

TO OBTAIN THE TAXES PAYABLE YOU MUST FIRST OBTAIN TAXABLE LOSS
GOI: \$950,000.00
Subtract: Annual interest: \$18,000.00
Equals \$932,000.00
Subtract: Expenses \$\$332,500.00
Equals: \$599,500.00
Subtract: Depreciation: \$1,000,000.00 x 85% / 27.5
\$30, 909.09
Equals: \$568,590.91 (TAXABLE LOSS)

\$568,590.91 Multiplied by the
Tax Bracket Percentage of 33%
\$187,635.00
Equals: \$380,955.91 or TAX PAYABLE

TAX PAYABLE \$380,955.91