Question

When estimating the future Net Operating Income (NOI) of an existing property, the appraiser usually considers:

a) Historical renovation costs.
b) Current market value of the property.
c) Anticipated rental income and expenses.
d) Property taxes from the previous year.

Answer 1

An appraiser estimates future NOI for a property by considering anticipated rental income and expenses, focusing on future profitability rather than past expenses or taxes. The correct option is C.

Step-by-step explanation:

When estimating the future Net Operating Income (NOI) of an existing property, an appraiser usually considers anticipated rental income and expenses. Unlike the historical renovation costs or property taxes from the previous year, the focus is on future earnings and outgoings.

It involves projecting income streams and expenses that the property is expected to generate and incur, which may include rental income, maintenance costs, management fees, and utilities. The current market value of the property provides a snapshot at a particular time but may not inherently reflect the potential for future NOI.