Effective gross income less all operating expenses is referred to as what?

The term that describes effective gross income less all operating expenses is net operating income. This concept is crucial in real estate and property management as it provides a clear picture of a property's profitability before considering financing costs and taxes.

When you calculate net operating income, you start with the total revenue generated by the property, which is the effective gross income — this includes all income sources, such as rent and any additional income generated by the property. From this total, you deduct all operating expenses, which encompass costs necessary to maintain and manage the property, such as property management fees, maintenance costs, property taxes, and insurance.

The remaining figure after these deductions reflects the overall operational profitability of the property. Understanding net operating income is essential for property owners and investors because it forms the basis for further financial analysis, including cash flow assessments and valuation methods. Calculating this accurately helps in making informed decisions regarding property management, investment opportunities, and financial forecasting.