Which of the following is NOT included in the calculation of Net Operating Income (NOI)?

Net Operating Income (NOI) is a key metric in real estate that measures a property's ability to generate income after deducting all operating expenses. The calculation of NOI includes all normal and necessary operating costs that are regularly incurred to keep the property functioning and generating income.

Regularly occurring operating expenses, property taxes, and maintenance costs are all essential components of the NOI calculation. Regular operating expenses cover items such as management fees, utilities, insurance, and other recurring costs that the property incurs. Property taxes are mandated expenses that must be paid to local jurisdictions and are therefore included as part of the operating costs. Maintenance costs are necessary to ensure the property remains in good condition and can continue to attract tenants.

Leasing expenses, on the other hand, are typically considered capital costs rather than regular operating expenses. They may include costs associated with tenant acquisition, such as commissions for leasing agents or marketing expenses. Since these costs are not ongoing and can vary significantly from year to year, they are excluded from the NOI calculation, which focuses on stable, recurring operating costs that contribute directly to a property's income-generating capabilities.

Consequently, identifying leasing expenses as not included in the NOI helps to clarify which financial elements must be accounted for in determining the profitability of a property.