Net Operating Income

The net income from a property, in a given period, after deducting operating expenses but before deducting capital expenditures, debt service, and taxes. To calculate Net Operating Income, the real estate professional subtracts operating expenses from effective gross income (Effective Gross Income – Operating Expenses = Net Operating Income). Net Operating Income is arguably the most important income metric, as it is widely used to estimate the value of the property using the Income Capitalization Method.

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