REE 3043 Chapter Notes - Chapter 8: Roll-Off, Earnings Before Interest And Taxes, Income Approach
Document Summary
The current value of a property is therefore a function of the income stream it is expected to produce. Capitalize- to convert future income into a present value. The measure of income is generally by annual net operating income (noi) Net operating income- the type of income to a property used in direct capitalization, calculated by deducting from potential gross income vacancy and collection losses and adding other income to obtain effective gross income. From this amount all operating expenses are subtracted, including management expense and a reserve for replacements, or capital expenditures and other nonrecurring expenses. Most cases property owner/ investor does not pocket the full amount of noi b/c it will typically be financed to the mortgage. And the us gov"t will collect a portion in income taxes. The mortgage lenders as well as the federal gov"t benefit.
