Property Management
What is a 'net operating income' (NOI) and how is it used in Delaware property management?
AThe total gross income from all rentable space in the building
BEffective Gross Income minus all operating expenses (excluding debt service and income taxes) — the fundamental income measure used for investment analysis, valuation, and lender underwriting✓ Correct
CThe property owner's net take-home after paying the mortgage
DThe management company's net fee after expenses
Explanation
NOI = Effective Gross Income − Operating Expenses (excluding mortgage payments and income taxes). It represents the income attributable to the property itself, before financing.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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