Class 3: Property Types & Income Mechanics
Class 3: Property Types & Income Mechanics
NOI fundamentals across multifamily, office, retail, and industrial. Definitions: effective gross income, net operating income.
--------------------------------------------------------------------------------------------------------------------
FINANCIAL SYSTEM
.png)
401K
Real Estate Categories and Key Financial Definitions
Real Estate Categories
Single Family House
A residential property designed for occupancy by one household or family. It typically has its own lot, yard, and is not attached to another dwelling unit.
Multifamily
A residential property containing more than one housing unit within a single building or complex. Examples include duplexes, triplexes, townhouses, and apartment buildings.
Office
Commercial properties designed for business operations, including professional services, administrative activities, and corporate headquarters.
Retail
Properties intended for selling goods and services directly to consumers. Examples include shopping centers, strip malls, standalone stores, and restaurants.
Industrial
Properties used for manufacturing, warehousing, distribution, and logistics operations. Examples include factories, warehouses, and industrial parks.
REAL ESTATE NET OPERATING INCOME
GROSS REVENUE (RENT - OTHER)
- VACANCY & COLLECTIONS
EFFECTIVE GROSS REVENUE
-OPERATING EXPENSES
NET OPERATING INCOME
(BEFORE TAXES & DEPRECIATION)
Gross Potential Rental Income (GPRI)
The total rental income a property could generate if all units or spaces were fully rented at market rent, with no vacancies or collection losses.
Vacancy and Collection Rate
An estimated percentage of rental income lost due to unoccupied units (vacancy) and tenants failing to pay rent (collection losses).
Effective Gross Rental Income (EGRI)
The actual rental income received after deducting vacancy and collection losses from the gross potential rental income.
Operating Expenses
The costs associated with operating and maintaining a property, excluding debt service, depreciation, and income taxes. These expenses reduce the effective gross income to calculate net operating income.
Common Operating Expenses
- Property management fees
- Repairs and maintenance
- Utilities (water, electricity, gas, trash)
- Property taxes
- Insurance (property and liability)
- Landscaping and grounds maintenance
- Administrative expenses
- Janitorial and cleaning services
- Pest control
- Security services
- Legal and accounting fees
- Marketing and advertising costs
- Reserves for replacement (capital reserves)
Net Operating Income (NOI)
The income generated from a property after deducting operating expenses from effective gross rental income. NOI is a key metric in evaluating the profitability and value of an income-producing property, often used in capitalization rate calculations.
Comments
Post a Comment