Net operating income is equal to:

A) Potential income minus expenses minus debt service.

B) Effective gross income minus potential income.

C) Potential gross income minus vacancy and credit loss minus expenses.

D) Effective gross income minus vacancy and credit loss.

Net Operating Income (NOI) is calculated by subtracting vacancy rates and credit loss from the potential gross income to arrive at the effective gross income, and then subtracting the operating expenses to determine NOI.

Explanation:

The question seeks to define Net Operating Income (NOI), which is a term used in real estate and business to determine the profitability of income-generating property. The correct answer to the question is C) Potential gross income minus vacancy and credit loss minus expenses. To arrive at NOI, one must first calculate the potential gross income that the property could generate if it were fully occupied and all tenants paid their rent. Then, one must subtract vacancy rates and credit loss to find the effective gross income. Afterward, one subtracts the operating expenses (which do not include debt service) from the effective gross income to determine the NOI. This calculation reflects the property's operating performance before financing and tax considerations are taken into account.

Net operating income is equal to:A) Potential income minus expenses minus debt service.B) Effective gross income minus potential income.C) Potential gross income minus vacancy and credit loss minus expenses.D) Effective gross income minus vacancy and credit loss.

Answer :

Final answer:

Explanation:

Other Questions

Net operating income is equal to:

A) Potential income minus expenses minus debt service.

B) Effective gross income minus potential income.

C) Potential gross income minus vacancy and credit loss minus expenses.

D) Effective gross income minus vacancy and credit loss.