Net operating income minus debt service equals:
Why Before-tax cash flow Is Correct
Answer B: Before-tax cash flow
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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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Fiduciary DutyThe highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.
Math Concepts
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