The starting point in calculating net operating income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses. This is commonly referred to as:
A) effective Gross Income
B) potential Gross Income
C) operating expenses
D) capital expenditures

Question

Quizplus · Accepted Answer

Potential Gross Income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses. This is important to know as it serves as the starting point in calculating net operating income. Effective Gross Income, while similar, takes into account vacancy and collection losses. Operating expenses and capital expenditures are expenses that are subtracted from the net operating income to arrive at the property's net income.

The Starting Point in Calculating Net Operating Income Is the Total