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 potential gross income, subtract vacancy and collection loss, and add any other property income to reach effective gross income. Then subtract operating expenses. Debt service, accounting depreciation, capital expenditures, and the owner's income taxes are not deducted in standard NOI. Treatment of replacement reserves can vary by the convention stated in the problem, so use the figures and labels supplied rather than assuming.
See also
Test the distinction
A relevant question from Valuation and Analysis, selected because its facts or explanation use this concept.
Gross scheduled income is $150,000, vacancy is 6%, and operating expenses are $47,000. What is the NOI?
Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanor under B&P Code section 123.
Primary sources
Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.