Real Estate Math
An investor pays $180,000 for a rental property. Annual rent is $18,000, operating expenses are $6,000, and the mortgage payment is $12,000 per year. What is the net operating income (NOI)?
A$12,000✓ Correct
B$6,000
C$0
D$18,000
Explanation
NOI = Effective Gross Income – Operating Expenses (excluding debt service) = $18,000 – $6,000 = $12,000. Mortgage payments are NOT subtracted to calculate NOI. NOI represents the property's income-generating ability before financing costs.
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