Real Estate Math
A property generates $3,200 per month in gross rental income. Annual operating expenses total $14,400. What is the annual net operating income (NOI)?
A$23,400
B$24,000✓ Correct
C$24,600
D$38,400
Explanation
Annual gross income = $3,200 × 12 = $38,400. NOI = Gross Income − Operating Expenses = $38,400 − $14,400 = $24,000.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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