What is the formula to calculate Net Operating Income (NOI)?

The formula to calculate Net Operating Income (NOI) is best captured by the option that represents the gross income generated by a property minus the vacancy and collection losses, plus other income sources such as additional revenue or miscellaneous income. The correct calculation focuses on determining the effective income that contributes to the property's profitability after accounting for potential losses.

In the context of real estate appraisal and property management, it's essential to start with the potential gross income (PGI). This figure represents the total revenue that the property would generate if fully leased at market rates. Subtracting vacancy and collection losses gives a more accurate figure known as effective gross income (EGI). Adding any additional income sources, such as parking fees or laundry facilities, allows for a complete assessment of the total income.

Net Operating Income is then derived by taking this effective gross income and subtracting the total operating expenses associated with managing the property. Therefore, the formulation that includes revenues and adjustments to account for losses accurately reflects the income available to the property owner, thus leading to the correct understanding of NOI.

Understanding this formula is crucial for anyone involved in real estate, as it helps assess a property's profitability and informs investment decisions.