Question

In the income approach, which of the following is NOT considered when calculating the net operating income?

a. real estate taxes

b. management fees

c. debt service

d. utilities

Answer 1

In the income approach to valuing real estate, net operating income (NOI) is calculated by subtracting all operating expenses from the gross potential income generated by the property. The income approach is often used in real estate appraisal to estimate the value of an income-producing property. When calculating NOI, all operating expenses are considered except for debt service.

Step-by-step explanation:

In the income approach to valuing real estate, net operating income (NOI) is calculated by subtracting all operating expenses from the gross potential income generated by the property. The income approach is often used in real estate appraisal to estimate the value of an income-producing property. When calculating NOI, all operating expenses are considered except for debt service, which represents the payments made to service the property's debt.