Question

When calculating the net operating income of a property, it is important to identify any expenses that will be incurred in attempts to maintain the property. All of the following would be considered operating expenses EXCEPT.

A. Property taxes
B. Property insurance premiums
C. Mortgage payments
D. Utility expenses

Answer 1

The correct answer is letter "C": Mortgage payments.

Step-by-step explanation:

Net Operating Income or NOI reflects income after operating expenses deducted but before income taxes and interest are deducted. If the result is a positive value it is called Net Operating Income. If the figure is negative, it is referred to as Net Operating Loss.

Net operating income is often used to calculate real estate income, such as residential properties or commercial properties. NOI is calculated by determining the Gross Operating Income (Gross potential income minus vacancy and credit loss) and subtracting the operating expenses (maintenance, fees, and insurance).

Thus, mortgage payments are not considered in the calculation of the NOI.