Property Valuation
In the income approach, Net Operating Income (NOI) is calculated as:
AEffective Gross Income − Operating Expenses (excluding debt service)✓ Correct
BPotential Gross Income − Mortgage Payments
CGross Rent − Property Taxes Only
DEffective Gross Income + Capital Expenditures
Explanation
NOI = Effective Gross Income − Operating Expenses. Operating expenses include property taxes, insurance, management fees, maintenance, and reserves—but NOT mortgage payments (debt service), depreciation, or income taxes.
People Also Study
Related Wyoming Questions
- A Wyoming property's net operating income is $38,000. Operating expenses are $22,000. What is the effective gross income?Real Estate Math
- A Wyoming commercial property has an effective gross income of $95,000 and operating expenses of $38,000. What is the net operating income?Real Estate Math
- A Wyoming property's effective gross income is $120,000, operating expenses are $72,000, and the mortgage payment is $30,000. What is the net operating income?Real Estate Math
- A Wyoming property has a potential gross rent of $24,000/year with $3,000 in vacancy and $1,500 in credit losses. Operating expenses are $8,000 and mortgage payments are $6,000. What is the NOI?Real Estate Math
- A Wyoming property manager creates a management report for the owner showing income, expenses, and reserves. This is called:Property Management
- A Wyoming commercial property's effective gross income (EGI) is calculated as:Property Valuation
- A Wyoming property manager calculating 'net operating income' for a managed property would include all of the following as operating expenses EXCEPT:Property Management
- A Wyoming homeowner who has been making mortgage payments for 10 years on a 30-year loan applies for a home equity line of credit (HELOC). The available equity is determined by:Finance
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.
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
Study This Topic
Practice More Wyoming Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Wyoming Quiz →