Which of these expenses is NOT taken into account when calculating NOI?

Net Operating Income (NOI) is a key metric used in real estate to assess the income-generating potential of a property. It is calculated by taking the total revenue from the property and subtracting all operating expenses associated with managing and maintaining the property.

When determining NOI, the focus is on the property’s operational efficiency rather than its financing expenses. Debt service, which includes mortgage payments and interest costs related to borrowing money for property purchase, is not included in the NOI calculation. This is because NOI assesses how well the property performs on its own, independent of how it is financed. By excluding debt service, investors and property managers can get a clearer picture of operating performance without the influence of financing structures.

Operating expenses, property management costs, and repair costs are all necessary expenses that directly relate to the management and upkeep of the property and thus are included in the calculation of NOI. These costs are essential for maintaining the property’s value and ensuring it can continue to generate income.