Property Valuation
What does NOI stand for in Nevada commercial real estate, and how is it calculated?
ANet Original Investment; purchase price minus improvements
BNet Operating Income; gross income minus operating expenses (excluding debt service)✓ Correct
CNominal Operating Index; a market performance measure
DNet Owner Income; income after mortgage payments
Explanation
NOI (Net Operating Income) = Gross Scheduled Income – Vacancy and Collection Loss – Operating Expenses (not including debt service or depreciation). It is the foundation of the income approach to value.
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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.
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.
Math Concepts
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