Net operating income (NOI) excludes which of the following?

Net operating income (NOI) excludes which of the following?

• A. Property taxes
• B. Mortgage payments
• C. Maintenance
• D. Property management fees

Answer: (B)

Net operating income shows what the property can generate from operations after paying the ongoing operating costs, but before financing costs and taxes. Debt service, which is the mortgage payments, falls under financing, not operations, so it is not deducted when calculating NOI. The other items listed—property taxes, maintenance, and property management fees—are typical operating expenses and are subtracted from gross income to arrive at NOI. So the item that NOI excludes is the mortgage payments. For a quick view, GOI minus operating expenses (excluding debt service) equals NOI.

Net operating income shows what the property can generate from operations after paying the ongoing operating costs, but before financing costs and taxes. Debt service, which is the mortgage payments, falls under financing, not operations, so it is not deducted when calculating NOI. The other items listed—property taxes, maintenance, and property management fees—are typical operating expenses and are subtracted from gross income to arrive at NOI. So the item that NOI excludes is the mortgage payments. For a quick view, GOI minus operating expenses (excluding debt service) equals NOI.