Texas Property Tax Consultant Practice Exam

What is the result when income is subtracted from operating expenses?

1. Net operating income

2. The gross rent multiplier

3. Market value

4. Excess profit

The correct answer is: Net operating income

When income is subtracted from operating expenses, the result is known as net operating income. This financial metric is crucial in real estate as it represents the income generated from a property after all operating expenses have been deducted. Net operating income provides insights into the profitability of a property and is often used by investors and property managers to evaluate the property's performance. It serves as a pivotal calculation for determining the potential return on investment and is typically used in various real estate analyses, including the assessment of cash flow and the calculation of capitalization rates. It helps stakeholders make informed decisions regarding property management, valuation, and investment strategies.