Question

Which of the following measures is considered the fundamental determinant of market value for income-producing properties?

a.potential gross income.
b.operating expenses.
c.net operating income.
d.capital expenditures.

Answer 1

c.net operating income.

Step-by-step explanation:

Income properties refer to a property developed or bought for the sole purpose of generating income. Income properties are thus an investment option. They comprise of residential premises such as single-family units or apartments that generate rental income. Commercial building, office apartment and shopping mall are income properties as they earn income for the developers.

Projects in the real estate industry are evaluated based on their projected net operating income. Net operating income(NOI) measures the profitability potential of a commercial property by calculating income after deducting the operating expenses. NOI techniques calculate the cash flow of a property after the necessary costs are paid.