What does net operating income (NOI) represent?

Study for the Texas Senior Property Tax Consultant Exam. Utilize flashcards and multiple choice questions, each with hints and explanations, to prepare for your test effectively. Maximize your chances of success!

Net operating income (NOI) is a crucial indicator in property management and real estate investment, representing the income generated by a property after deducting all operating expenses, but before accounting for financing costs and taxes. This measure is important because it helps investors assess the profitability of a property.

NOI is calculated by taking all rental income received from the property and subtracting operating expenses such as property management fees, maintenance costs, property taxes, and insurance. The significance of this figure lies in its ability to provide a clear picture of a property's operational efficiency and cash flow potential.

Understanding NOI is essential for potential buyers, investors, and property managers as it serves as a key component in property valuation and investment analysis, guiding decisions around purchasing, selling, or managing real estate assets.

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