Valuation and Analysis, 14% of the examination

Net operating income (NOI)

Effective gross income less operating expenses, before debt service and before depreciation.

Start with gross scheduled income, deduct vacancy and collection loss to reach effective gross income, then deduct operating expenses. Debt service, book depreciation, capital improvements and the owner's income taxes are never operating expenses, because NOI describes the property rather than the owner's financing or tax position. A reserve for replacement of short-lived components is a legitimate operating expense.

See it in a question

One question from Valuation and Analysis, so the term lands in the context the exam uses it in.

Valuation and Analysis · 14%Methods of Estimating Value

An appraiser values a 40-year-old single-family home in an established neighbourhood with many recent sales. Which approach carries the most weight?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Property Valuation and Financial AnalysisThree short sub-topics carrying fourteen percent, and most of the arithmetic on the exam. The three approaches to value, and the income analysis that turns a rent roll into a number.14%Practise Valuation and Analysis28 questions on this area, every option explained.Practice

Net operating income (NOI)

See also

See it in a question

Where this is tested

Other terms in this area