Alabama Real Estate Practice Exam

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Which of the following is NOT a step in calculating net operating income (NOI)?

  1. Estimating potential income based on actual rent collected

  2. Combining information about income and expenses

  3. Subtracting allowances for vacancies

  4. Deducting property's operating expenses from EGI

The correct answer is: Estimating potential income based on actual rent collected

Calculating net operating income (NOI) involves estimating potential income based on actual rent collected, combining information about income and expenses, subtracting allowances for vacancies, and deducting property's operating expenses from EGI. Since all of these statements are true, it is important to identify the option that is NOT a step in calculating NOI. Option A, estimating potential income based on actual rent collected, is incorrect because it is an essential step in calculating NOI. Therefore, option A is not the correct answer.

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