Property Management
A 'net operating income' (NOI) in property management is calculated as:
AGross potential income minus vacancies
BEffective gross income minus operating expenses✓ Correct
CGross rent minus mortgage payments
DTotal revenue minus depreciation
Explanation
NOI = Effective Gross Income (EGI) − Operating Expenses. EGI is gross potential income minus vacancy and credit loss.
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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.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Math Concepts
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