An operating expense for an investment property that is NOT included when calculating NOI is:
Why Mortgage payments (debt service) Is Correct
Answer B: Mortgage payments (debt service)
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
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- The operating expense ratio (OER) is calculated as:Property Management
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- Which appraisal approach involves estimating the value of a property by calculating the cost to reproduce or replace the improvements plus the land value?Property Valuation
Key Terms to Know
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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